## DragIT - Break-even cost changes

### Changes in total cost

Click and hold on the total cost curve and drag it to see the impact of changes in cost. Then have a go at the questions below.

### Changes in fixed cost

Click and hold on the fixed cost curve and drag it to see the impact of changes in fixed cost. Then have a go at the questions below.

1

##### Fixed cost increases

When fixed cost increases which of the following will occur?

 a) Total cost, but not variable cost will increase b) Break-even output will fall c) Profit at the existing level of output will rise d) Price will increase Yes, that's correct. Fixed cost is a part of total cost and so when it rises, total cost will also increase.No, that's not right. Fixed cost is a part of total cost and so when it rises, total cost will also increase.Your answer has been saved.

2

##### Changes in variable cost

When variable cost increases, the break-even level of output will fall.

 a) True b) False Yes, that's correct. The statement is false. When variable cost increases, the break-even level of output will rise.No, that's not right. The statement is false. When variable cost increases, the break-even level of output will rise.Your answer has been saved.

3

##### Changes in variable cost

When fixed cost falls, the break-even level of output will fall.

 a) True b) False Yes, that's correct. The statement is true. When fixed cost falls, the break-even level of output will fall.No, that's not right. The statement is true. When fixed cost falls, the break-even level of output will fall.Your answer has been saved.

4

##### Break-even - changes in costs

Choose appropriate options in the paragraph below to provide a description of the impact cost changes have on the break-even level of output.

When fixed costs the fixed cost curve will shift , but when fixed costs the curve will shift . A rise in or variable costs will lead to a rise in the level of output whereas a fall in fixed or variable costs will lead to a fall in the break-even level of output.

Yes, that's correct. Well done.No, that's not quite right. Have another go.Your answer has been saved.