Be sure that you are putting some thought into your discussion 150-200 words. Please also
reply to 2 other students with 50-100 words. When you reply, please ensure you acknowledge
their post, write about something that relates to their post, and ask an open-ended question.
In a total of 150 to 200 words, please answer the following questions:

1. Describe how total variable costs and unit variable costs behave with changes in the
level of activity.

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2. Describe how total fixed costs and unit fixed costs behave with changes in the level of
activity.

–

3. How does the sales mix affect the computation of the break-even point?
–

Responds:

Mariela:
“1.Total variable costs increase and decrease proportionally with the level of activity. The
variable costs depend on the number of units being produced and on the direct cost per unit. On
the other hand, the total unit variable costs remain the same regardless of level of activity. Units
produced being the activity base, is what changes, but the cost per unit remains the same.
2. When it comes to fixed costs, these are much like the variable costs but “the other way
around”. Total fixed costs, much like variable costs per unit, remain the same regardless of the
level of activity. On the other hand, unit fixed costs are much like total variable costs. However,
unit fixed costs increase and decrease inversely (not proportionally) with the level of activity.
3. When the sales mix of the products changes, so does the break-even point. This often
happens when customers buy more of either low-margin products or high-margin products.
When customers purchase more low-margin products, the break-even point increases. This
means that the demand is higher and that a company must produce more to meet the demands.
On the contrary, when customers purchase more high-margin products, the break-even point
decreases. This means that you do not end up with much loss because you are generating what
you are spending.”
Reply (50-100 words):

Damian:
” 1.) To describe how total variable costs and unit variable costs behave, more specifically with
the changes in the level of activity; Total variable costs directly increase or decrease with
production changes. If a company makes more stuff, these costs rise; if they make less, they
drop. Unit variable costs for each thing stay the same within a particular production range. For
example, if a product costs $5 each to make, it’s always $5, whether the company makes 10 or
100. Knowing this helps businesses set prices, plan production, and manage costs.

2.) Well, the reason as to how the total and unit fixed costs fluctuate as activity level changes
is because the Total Fixed Costs always remain constant, while Unit Fixed Costs change with
sales. Understanding this helps businesses manage expenses, adapt to sales changes, and set
prices wisely. For example, if a shop pays $1,000 monthly rent and sells 1,000 items, each item
costs $1. If they double sales to 2,000 items, each item costs $0.50. If sales drop to 500 items,
each item costs $2.

3.) In terms of how the sales mix affects the computation of the break-even point is because
the combination of products a company sells affects its break-even point, where it covers costs
but doesn’t profit. This point all depends on the product mix, with each having its own costs and
prices. With more high-profit items, it lowers the break-even point, and it can make profit easier.
Now, with more low-profit items, it instead raises, as well as needing more sales. This, in turn,
can help companies decide what to sell and at what price. For example, a restaurant selling
more $5 burgers and fewer $3 pizzas, with $10,000 in fixed costs, it can eventually change its
break-even point.”
Reply (50-100 words):