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Once a company hits its break-even point, net operating income will Increase by an amount equal to the selling price per unit multiplied by the number of units sold above the break-even point. Increase by an amount equal to the contribution margin ratio multiplied by the number of units sold above the break-even point. Increase by an amount equal to the contribution margin per unit multiplied by the number of units sold above the breakeven point. Increase by an amount equal to the variable cost per unit multiplied by the number of units sold above the break-even point.
Expert Answer
The correct answer is that the net operating income will increase by an amount which is equal to the contribution margin per unit multiplied by the number of units sold over and above the breakeven point. (Number 3)
Breakeven point is the point where there is no profit and loss. This means cost is equal to the revenue. Any sales made over and above the breakeven point will result in increasing the net income of the company by an amount which would be the contribution margin (sales – variable cost) multiplied by the number of units which are sold over the breakeven point.
