When fixed cost falls by 10%, break-even sales also fall by:
A20%
B10%
C5%
DNo change
Answer & Solution
Correct answer: B. 10%
1. Break-even sales = Fixed cost / P/V ratio.
2. P/V ratio is unaffected by a change in fixed cost.
3. Therefore BEP sales moves proportionally with fixed cost.
4. A 10% fall in fixed cost yields a 10% fall in BEP sales.
_Source: ICAI BoS Inter Paper 3, Ch 14 "Marginal Costing", §14.5 ¶5_
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