Before reading the analysis of Table 9.2, calculate the contribution made by each product, work out the break-even point of each, and then explore the effect on the break-even point of:

(a) changes in the price charged to customers;

(b) changes in the variable costs; and

(c) changes in the fixed costs.

If you have access to a spreadsheet package, this is the kind of problem for which spreadsheets are highly suitable.

Table 9.2

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Table 9.2 Calculation of break-even point and of sales beyond the break-even point Selling price Variable cost Contribution per item Fixed costs Break-even point Profit for sales of 500 units Jackets 9 6 3 600 200 units 900 Coats 12 10 2 600 300 units 400