Selling price per unit Rs. 10; Variable cost Rs. 8 per unit; Fixed cost Rs. 20,000; Break-even production in units .a.2,000.b.2,500.c.16,300.d.10,000
Question
Selling price per unit
Rs. 10
Variable cost per unit
Rs. 8 per unit
Fixed cost
Rs. 20,000
Break-even production in units
- a. 2,000
- b. 2,500
- c. 16,300
- d. 10,000
Solution
The break-even point in units can be calculated using the formula:
Break-even point in units = Fixed Costs / (Selling Price per unit - Variable Cost per unit)
Given in the problem:
Selling Price per unit = Rs. 10 Variable Cost per unit = Rs. 8 Fixed Costs = Rs. 20,000
Substituting these values into the formula:
Break-even point in units = 20,000 / (10 - 8) = 20,000 / 2 = 10,000 units
So, the correct answer is (d) 10,000 units.
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