Changes in fixed costs are much more significant to a compan

Changes in fixed costs are much more significant to a company than changes in variable costs. Do you agree? Explain

Solution

No I do not agree, fixed cost changes affect only the net profit figures and not the breakeven sales unit figure which indicates the minimum units to be produced to cover the costs. Moreover increase in fixed cost can be allocated to the different units produced where as change in variable costs determine the contribution level of the particular unit in case mulitiple product lines are produced in a factory, which can lead to discontinuation of the product line also.