How will an increase in the selling price per unit affect the break-even point?

The break-even point is the level of sales at which a business covers all of its costs, calculated using the formula:

Fixed Costs ÷ (Selling Price per Unit – Variable Cost per Unit).

If the selling price per unit increases, while variable costs remain unchanged, the contribution per unit also rises. This means each unit sold contributes more towards covering fixed costs, so the business needs to sell fewer units to break even. Therefore, increasing the selling price per unit will reduce the break-even point, enabling the firm to cover its costs more quickly and reach profitability sooner.