In a strategy meeting, a manufacturing company’s president said, “If we raise the price of our product, the company’s break-even will be lower.” The financial vice president responded by saying, “Then we should increase our price. The company will be less likely to incur a loss.” Do you agree with the president? Why? Do you agree with the financial vice president? Why?
Describe the assumptions underlying CVP analysis.
How does an increase in income tax rate affect the breakeven point?