Correct Response: C. The breakeven point is when revenue equals total costs. One way the breakeven point will rise is when expenses rise, since these are related to costs. Increasing the amount of factory space needed for production is likely to increase costs, which will cause the breakeven point to rise. The company will need to generate more revenue to break even. If the cost of raw materials decreases, then the company's breakeven point will decrease (A). Production running at maximum capacity (B) is likely to reduce the cost per unit produced, which will reduce the breakeven point. Lower inventory due to mid-season stock shortages will cause a decrease in sales, which in turn will cause a reduction in revenue but will not alter the breakeven point, which will essentially remain the same (D).
