Question

If the property tax rates are increased, this change in fixed costs will result in a decrease in the break-even point. True False

Answer 1

Answer:

False

Explanation:

Fixed Cost is the cost incurred on fixed factors of production, incurred even at zero production level. Break Even point is the point at which total revenue = total cost, there are no profits.

Property being a fixed factor, property tax is a fixed cost. Increase in it increase fixed cost & hence total costs. So, total revenue needed to equalise total cost increases, & hence the break even point rather increases.