Question

The fixed cost of the firm is Rs. 60,000/- per month. The variable cost is Rs. 10/- per unit and selling price is Rs. 50 per unit. The break even quantity will be
1. 1300
2. 1400
3. 1500
4. 1600

Answer 1

Correct Answer - Option 3 : 1500

Concept:

\({\rm{Break\;even\;quantity}} = \frac{{Total\;fixed\;cost\;\left( {TFC} \right)}}{{Price\;per\;unit\;\left( P \right) - Variable\;cost\;\left( {V.C.} \right)}}\)

Calculation:

Given:

total fixed cost = Rs 60,000 per month, variable cost = Rs 10 per unit, price per unit (P) = Rs 50 per unit

\({\rm{Break\;even\;quantity}} = \frac{{Total\;fixed\;cost\;\left( {TFC} \right)}}{{Price\;per\;unit\;\left( P \right) - Variable\;cost\;\left( {V.C.} \right)}}\)

\(Break~even~quantity=\frac{60000}{50-10}= \frac{60000}{40}=1500\)