Self-test Bob Ltd has one product, which has the same selling price for each unit sold.

Variable costs and fixed costs do not vary at any level of activity during the period. The company sells its entire production.

Once we know where the current break-even point is, we can experiment with what will happen if various items in the formulae change.

You are given the following information:

(i) Bob Ltd has fixed costs of £160,000 for the period;

(ii) the selling price of its product is £38 per unit; and

(iii) total variable cost per unit amounts to £30.

You are required to calculate the number of units required to break even.

You are now required to examine the effects of the following changes on the break-even point.

(i) the selling price is increased to £40 per unit;

(ii) the fixed costs have increased to £180,000 and the selling price remains at

£38 per unit; and

(iii) the variable costs increase to £36 per unit; the selling price remains at

£38 per unit and the fixed costs are £160,000.

As a result of this examination can you arrive at some general conclusion relating to the movement of the break-even point?