Devolved query critical factor...help?

System

After having a look at the devolved last week, which I'm doing for real this week, I came across a question that I just can't get my head around! I blame christmas!

The question, which I can't remember exactly, asked what percentage direct labour costs could increase before break even point was reached. It then went on to ask if direct labour was a critical factor, the company policy is to see anything that results in a loss if it increases by 25% or less as a critical factor.

How can I work out the percentage that the direct labour cost can increase by before reaching break even point?

Please help!!

System

Re:Devolved query critical factor...help?

Have you got your data presented like this:

Sales
...Direct Materials
...Direct Labour
...Direct Expenses
...Cost of Sales
Contribution
Fixed Costs
Profit

If not, you should still have been given the relevant information somewhere. The point is that you need the profit figure and the direct labour figure. To illustrate, imagine that the profit is £30,000. If the direct labour cost were to increase by £30,000 then the profit would become zero: break-even point would be reached.

You have been asked to calculate the amount that direct labour can increase by as a percentage before break-even is reached. This is simply a case of dividing the absolute (amount of money) amount of the increase by the orginal break-even figure and multiplying by 100. For example, if the Direct Labour cost were £60,000 the it would have to increase by (£30,000 ÷£60,000) = 50% to make break-even.

Hope this helps
Graham