Let's assume some hypothetical numbers for Ms. E's herbs business and analyze the effects of fixed costs/variable cost mix on profits:

Current weekly production is 500 units with an expected demand of 600 units next week. Material costs are $10 per unit, She hires 20 full time workers each working 40 hours per week ant an hourly wage of $15 per hour. Rent for the factory is $2250 per week. Assuming a selling price of $50 per unit , analyze the effect on contribution margin, operating profit and breakeven point with (a) no change in fixed costs and (b) fixed costs increasing by 10%.