You are required to draw a break-even chart and show the effect of the following: (a) 10% decrease in fixed cost (b) 10% decrease in variable cost (c) 10% increase in selling price

The following information is provided by XYZ Ltd :            

Fixed cost                     Rs.5,000

Variable cost                 Rs.10 per unit

Selling price                  Rs.20 per unit

Sales volume                 1,000 units

           

You are required to draw a break-even chart and show the effect of the following:

(a)                10% decrease in fixed cost

(b)                10% decrease in variable cost

(c)                10% increase in selling price

(d)        10% increase in sales volume.

Solution.

Basic calculation For Original Data

Particular	500 units	1000 units	1500 units	2000 units
Sale value	10000	20000	30000	40000
Variable Cost	5000	10000	15000	20000
Fixed Cost	5000	5000	5000	5000

 

Basic Calculation when there is 10% decrease in Fixed Cost

Particular	500 units	1000 units	1500 units	2000 units
Sale value	10000	20000	30000	40000
Variable Cost	5000	10000	15000	20000
Fixed Cost	4500	4500	4500	4500

Basic Calculation when there is 10% decrease in variable cost

Particular	500 units	1000 units	1500 units	2000 units
Sale value	10000	20000	30000	40000
Variable Cost	4500	9000	13500	18000
Fixed Cost	5000	5000	5000	5000

Basic Calculation when there is 10% increase in selling price

Particular	500 units	1000 units	1500 units	2000 units
Sale value	11000	22000	33000	44000
Variable Cost	5000	10000	15000	20000
Fixed Cost	5000	5000	5000	5000

Basic Calculation when there is 10% increase in sales volume

Particular	500 units	1000 units	1500 units	2000 units
Sale value	11000	22000	33000	44000
Variable Cost	5000	10000	15000	20000
Fixed Cost	5000	5000	5000	5000