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Techpro has a selling price of $10 and variable costs of $6. if both the selling...

Techpro has a selling price of $10 and variable costs of $6. if both the selling price and the variable costs increase by 10%, the break-even point will not change.

True/false

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Answer #1

Answer is as follows:

Correct Option: False

The Break-Even point will change when there is a change in selling price and variable costs.

Since the formula for break-even point is Fixed Costs / SP - VC, change in denominator will affect the change in break-even point.

For example if we take Fixed Costs as $100000, original SP = $10, VC= $6

10% increased SP = $11, VC = $6.6

Break - even point :

Before change = 100000 / 10 - 6 =25000 units

After change = 100000 / 11 - 6.6 = 22727 units

By this we can clearly say that change in selling price and variable costs brings change in break-even point.

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