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Answer (D) is correct . The original breakeven level was: ? Breakeven point = Fixed costs ÷ Contribution margin ratio = $800,000 ÷ (1.0 – .68) = $2,500,000 The new level is: Breakeven point = Fixed costs ÷ Contribution margin ratio = $700,000 ÷ (1.0 – .80) = $3,500,000 Thus, there is an increase of $1,000,000 ($3,500,000 – $2,500,000).

Answer (A) is incorrect because This amount uses the variable cost percentage in the denominator instead of the contribution margin percentage.
Answer (B) is incorrect because This amount uses the same contribution margin percentage (20%) in both calculations.
Answer (C) is incorrect because This amount reverses the two contribution margin percentages.