Question

To better understand how CVP analysis works, let's assume that shipping costs have increased significantly causing the unit variable cost to increase by 10%, what effect will this have on Desossa's break-even point?

Answer 1

When the unit variable cost increases by 10%, Desossa's break-even point will also increase.

Step-by-step explanation:

When the unit variable cost increases by 10%, it means that Desossa's costs to produce each unit of their product have increased. This will result in an increase in the break-even point for Desossa. The break-even point is the level at which Desossa's revenues equal its costs, so if the costs increase, Desossa will need to sell more units to reach the break-even point.