An increase in total fixed costs increases the break-even point.

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Total fixed costs are costs that do not vary with the level of production or sales, such as rent, salaries, or insurance. Since these costs still have to be paid even if no goods or services are produced, they represent a financial obstacle for businesses to overcome before generating profits. Therefore, the higher the total fixed costs, the more sales a firm has to make to cover its expenses and reach the break-even point. In other words, fixed costs raise the bar for the minimum levels of revenue that a company needs to make to break even, which implies a greater reliance on volume and price to achieve profitability. Conversely, lower fixed costs lower the break-even point, as they reduce the amount of sales a firm needs to cover its fixed and variable costs and start making a profit.

An Increase in Total Fixed Costs Increases the Break-Even Point