What happens to the break-even point if:

1 Fixed costs increase by 10 per cent?

Bond SA is planning to manufacture a new product with an initial sales forecast of 3,600 units in the first year at a selling price of €800 each. The finance department has calculated that the variable cost for each truck will be €300. The fixed costs for the manufacturing facility for the year are €1,500,000. Using the information provided by the sales forecast and the finance department it is now possible to calculate the planned profit, the contribution and the break-even point for this venture by leveraging the nature of fixed and variable costs.

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Planned profit Planned break-even point Sales revenue 2,880,000 Fixed costs 1,500,000 Less variable costs 1,080,000 Contribution per unit Contribution 1,800,000 Sales value variable cost 500 Less fixed costs 1,500,000 Break-even point (units) Profit 300,000 Fixed costs/contribution per unit 3,000