MI – May 2016 – L1 – SA – Q11 – Cost-Volume-Profit Analysis

Calculate the number of units required to break even given the fixed costs, sales price, and marginal cost.

Question

A company manufactures a single product with a sales price of N1,000 and a marginal cost of N650. If the fixed cost is N685,300 per annum, then the number of units required to Break Even is:

A. 1,950
B. 1,955
C. 1,958
D. 1,985
E. 1,988

Answer

Answer: C

Explanation:
The break-even point in units is calculated using the formula:

Break-Even Point = Fixed Costs/ (Sales Price−Marginal Cost)

Substitute the given values:

Break-Even Point = ≈1,958 units

Therefore, the number of units required to break even is 1,958.

Tags: Break-Even Point, Fixed Costs, Marginal Cost, Sales Price
Level: Level 1

Topic: Cost-Volume-Profit (CVP) Analysis
Series: MAY 2016

Uploader: Kwame Aikins