Fixed Cost vs. Variable Cost - Assignment Example

Participation Exercise 6: To achieve a breakeven point, there is need to have volumes that provide for a profit afterreduction of the costs incurred. These costs range from fixed costs and variable costs. The fixed costs remain the same throughout or for a longer period in the business while the variable costs change in relation to volumes produced. These and other factors such as the selling price allocated to the products, and the volumes produced impact the breakeven point that the business has to consider.

Variable costs:Variable costs include costs incurred in the production of each unit of products. The higher the number of units produced the lower the variable costs providing for more profits to the business (Von). The lower the number of units produced the higher the variable costs incurred. It is relevant to note that the higher the variable costs the lower the breakeven point, the lower the variable costs the higher the breakeven point and hence the level of profits the business registers.

Overheads:Overheads normally refer to the fixed costs that the business incurs in running its regular operations in production. The more the volumes produced the lower the fixed costs in each unit product. These affect the breakeven point based on the costs aspect. Volumes produced:The volumes produced determine the costs that the business incurs and hence the level of profits obtained. The higher the volumes the lower the costs incurred and the higher the profits registered. Selling price:The selling price depends on the costs incurred and the number of units produced.

The point the selling price is set at needs to consider the breakeven point to ensure the profitability of the business. These factors affect the breakeven point of the business. Work cited:Von, Kanal. Break Even – Easily Explained. Viewed on April 1, 2015 from https://www.youtube.com/watch?v=ZihWEVWCJYk&feature=youtu.be