if the company introduces new machinery and reduces its direct labour, how is the break even point affected?

Answer 1

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It will be affected relative to the cost difference between the machine and labor . If the cost of the machine is more than labour in the short term it will be higher if not then lower .

You should be able to calculate a realistic break even point for when the machine is paid off , obviously you need to take into account running costs and maintenance and whether or not they will exceed your existing labour costs .

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Source(s): Many headaches from trying to figure out the same thing .

Answer 2

Fixed costs (depreciation of machinery) increase,

Variable costs (wages) decrease ...