Price Increase Lowers Break-Even Point

Steps:

• Original fixed costs = 450 units × (40% × $50) = 450 ×$20 = $9,000.
• New selling price = $50 × 1.10 =$55; variable cost = $50 -$20 = $30 (unchanged).
• New contribution per unit = $55 -$30 = $25.
• New break-even = $9,000 ÷$25 = 360 units (decrease of 90 units from 450).

Why D is correct:

• Higher selling price increases contribution margin per unit, reducing break-even units via formula: Fixed costs ÷ Contribution per unit.

Why the others are wrong:

• A: Price increase decreases, not increases, break-even point.
• B: Decrease is 90 units, not 9.
• C: Wrong direction (increase) and magnitude (90 units).

Final answer: D