If a Company Is Currently Operating at Its Break-Even Point

Multiple Choice

If a company is currently operating at its break-even point, which of the following statements is true? (Income tax considerations are ignored.)

A) If fixed costs increase, net profit will decrease by the contribution margin ratio times the amount of the increase in fixed costs.
B) If sales increase by 20%, net profit will also increase by 20%, assuming that fixed costs are not equal to zero.
C) If variable costs double, net profit will decrease by 50%.
D) Net profit will increase by the increase in number of units sold times the contribution margin per unit.