A manager does a break-even analysis and finds that his value for BE, the break-even point, has decreased over time. Which of the following could be responsible for this event?
A) TFC has increased.
B) P has increased.
C) VC has decreased.
D) P has decreased.
Answer: D
Explanation: The value of the expression [TFC/(P - VC)] would increase if TFC were to increase in value, VC were to decrease, or P were to increase. All of these events would increase the value of the numerator of the fraction relative to the denominator, thereby causing the value of fraction BE to increase. If P were to decrease, however, the denominator of the fraction would increase, causing the overall value of the fraction to decrease. Therefore, the value of BE, the break-even point, would decrease.
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