FC = Fixed Cost
R = Revenue
VC = Variable Cost
FC = 15,000
R = 7 per units
VC = 5 per units
a) Calculate Break Even point
b) Calculate Break Even point if VC increase by 10%, R Decrease by 10% and FC remain the same
Solution:
a) Break Even point = FC / R -VC
Break Even point = 15,000 / 7 - 5
Break Even point = 15,000 / 2
Break Even point = 7,500
b)
VC increase by 10% = 5 *10 /100 = 0.5
VC = 5 + 0.5
VC = 5.50
R Decrease by 10% = 7 * 10 /100 = 0.7
R = 7 - 0.7
R = 6.30
Break Even point = FC / R -VC
Break Even point = 15,000 / 6.30 -5.50
Break Even point = 15,000 / 0.80
Break Even point = 18,750
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