The break-even point can change with different scenarios examples of this are:

Fixed costs increasing

The selling price goes down

Variable costs decrease

Contribution goes up

When the fixed costs increase obviously the break-even point will increase as well because your expenditure has gone up. When the selling price goes down the break-even will increase because you’re making less money on the product. When the variable costs decrease the break-even point will also decrease because you’re expenditure has gone down. When the contribution goes up the break-even will then decrease because you’re selling more of the product.

Number of T-Shirts sold 0 2000 4000 6000

Sales Revenue £0 £56000 £112000 £168000

Fixed Costs £80000 £80000 £80000 £80000

Variable Costs £0 £24000 £48000 £72000

Total Cost £80000 £104000 £128000 £152000

Fixed Costs: £80,000 Selling Price: £28 Costs: 12

Selling Price £28 – Variable Costs £12 = £16

80,000 divided by 16 = 5000

Some may ask what is the relevance of determining the breakeven point for a…