Question Tag: Break-Even Point

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  • 1 Marks

QTB – Nov 2014 – L1 – SA – Q15 – Mathematics of Business Finance

Determines the smallest number of units to produce for break-even.

Assume that the standard selling price of a medium-size detergent produced by BICU Nigeria Limited is N250 per unit. If the total fixed cost is N85,000 and the cost of producing each unit is N130, what is the smallest number of units which the company should produce in order to break even?
A. 709
B. 708
C. 707
D. 706
E. 700

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  • 20 Marks

MI – Nov 2014 – L1 – SB – Q3 – Cost-Volume-Profit (CVP) Analysis

This question involves break-even point, target profit, and the effect of cost changes on break-even.

A company that operates below break-even point year-after-year needs to be restructured.

a. What is break-even point? (2 Marks)

b. Elebu Nig. Plc. manufactures four products at its GBOOPA Plant in Olorungbebe Industrial Estate.

The company sold 450,000 units of its product at N60 per unit. Variable costs are N45 per unit, while the fixed cost incurred evenly throughout the year amounted to N2,916,000, which comprises of manufacturing costs of N1,800,000 and selling costs of N1,116,000.

You are required to calculate:
i. The break-even point in units and in value (5 Marks)
ii. The number of units that must be sold to earn an income of N225,000 before income tax (3 Marks)
iii. The number of units that must be sold to generate after-tax profit of N300,000 if the income tax rate is 40% (5 Marks)
iv. The number of units required to break-even if the fixed cost increases by 2.5% and variable cost increases by 5% (5 Marks)

 

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  • 1 Marks

MI – May 2022 – L1 – SA – Q10 – Cost-Volume-Profit (CVP) Analysis

Determining monthly sales required to achieve a target profit.

PQR produces a single product QR which sells for ₦500 with a variable cost of ₦340. The fixed cost of ₦5,520,000 was accrued evenly over the year and the company wants to achieve a monthly target profit after tax of ₦960,000. Considering a company tax rate of 20%, calculate the level of monthly sales required to achieve the target profit.

A. 40,500 units
B. 39,500 units
C. 34,500 units
D. 10,375 units
E. 8,875 units

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  • 1 Marks

MI – May 2021 – L1 – SA – Q12 – Cost-Volume-Profit (CVP) Analysis

Calculate the break-even sales based on given budget data.

You are given the following data:

Description Amount (₦)
Budgeted sales 500,000
Budgeted contribution 200,000
Budgeted profit 50,000

The break-even sales is:

A. ₦475,000
B. ₦450,000
C. ₦375,000
D. ₦350,000
E. ₦125,000

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  • 1 Marks

MI – Nov 2023 – L1 – SA – Q5 – Cost-Volume-Profit Analysis

Calculating the break-even point given sales figure and margin of safety.

What is the break-even point where sales figure is ₦15,000,000 and margin of safety is 30%?
A. ₦2,000,000
B. ₦3,000,000
C. ₦6,500,000
D. ₦10,500,000
E. ₦12,000,000

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  • 1 Marks

MI – Mar-Jul 2020 – L1 – SA – Q3 – Cost-Volume-Profit (CVP) Analysis

Calculate the monthly sales required to achieve the target profit considering the fixed cost and tax rate.

XYZ Company produces a single product XEE selling for N20 and has a variable cost of N12 per unit. If fixed cost of N2.4 million accrues evenly over the year and the company wants to achieve a monthly target profit after tax of N526,400 considering a company tax rate of 30%, calculate the level of monthly sales required to achieve the target profit in units.

A. N365,800
B. N300,000
C. N119,000
D. N90,800
E. N71,060

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  • 1 Marks

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.

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

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  • 1 Marks

MI – May 2015 – L1 – SA – Q3 – Cost-Volume-Profit (CVP) Analysis

Calculate the variable cost per unit based on the given dat

The variable cost per unit is
A. N8.00
B. N7.50
C. N6.25
D. N5.50
E. N5.00

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  • 15 Marks

MA – Nov 2017 – L2 – Q5 – Standard Costing and Variance Analysis

Calculate standard selling price, variances, break-even point, and margin of safety for a company using standard marginal costing.

Zealow Ltd has just introduced a new standard marginal costing system to assist in the planning and control of the production activities for the single product which the company manufactures, “The Stand.” The system became operational on 1 March 2017.

The Management Accountant has consulted with the Senior Engineer and they have agreed on the following standard specifications to manufacture one unit of the product known as “The Stand”:

  • Direct materials: 4kg @ GH¢1.75 per kg
  • Direct labour: 2 hours @ GH¢10 per hour
  • Variable overhead: 2 hours @ GH¢8.25 per hour

The Marketing Director has advised that in Zealow Ltd’s industry, the budgeted selling price is normally calculated to achieve a mark-up of 30% on cost.

The budgeted level of production and sales activity has been agreed with both production managers and sales staff at 24,000 units per month.

The actual results for the month of March 2017 are as follows:

  • Sales: 22,000 units yielding a total revenue of GH¢1,276,000
  • Production: 23,000 units
  • Direct Materials: 90,000 kgs at a cost of GH¢162,000
  • Direct labour: 48,000 hours at a cost of GH¢576,000
  • Variable overhead: GH¢350,000

Required:

a) Calculate the standard selling price of one unit of “The Stand” and prepare a summary budgeted profit statement for Zealow Ltd for the month of March 2017.
b) Calculate the relevant variances for March 2017 under the headings of sales, materials, labour, and overheads.
c) Zealow Ltd uses a standard marginal costing system and therefore fixed costs have been ignored in the calculations shown above. Assuming that the fixed costs for the company are estimated to be GH¢1,879,200 per annum, calculate the monthly sales in both units and value that will be required to break-even and estimate the margin of safety, based on the current budget levels.

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  • 20 Marks

MA – Nov 2020 – L2 – Q5 – High/Low Analysis, Cost-Volume-Profit (CVP) Analysis

Determine maintenance costs using the high-low method, and calculate break-even point, required sales for target profit, and margin of safety for Quickspray Ltd.

Quickspray Ltd offers professional car spraying services at Suame Magazine. The company is planning its activities for the month of June 2018 for its saloon car spraying section. The company charges a service fee of GH¢1,000 and incurs fixed cost (excluding fixed maintenance cost) and variable cost per unit (excluding variable maintenance cost) of GH¢35,000 and GH¢644.39 respectively for spraying a saloon car.

The following data also relates to Quickspray Ltd on the maintenance hours of its key machine, revenue, and profit for the six months ended April 2018:

Month Maintenance Hours Revenue (GH¢) Profit (GH¢)
November 2017 1,200 19,000 700
December 2017 1,425 24,000 1,425
January 2018 1,410 20,100 650
February 2018 1,400 20,000 1,000
March 2018 1,175 18,000 (125)
April 2018 1,275 19,000 175

Total fixed cost increases by GH¢1,120 when maintenance hours go beyond 1,400.

Required:

a) Determine the total maintenance cost of production, using the high-low method if:

i) Maintenance hours for May are budgeted to be 1,520.
ii) Maintenance hours for June are budgeted to be 1,075.

b) Calculate for the month of May the:

i) Break-even point in units and value.
ii) Sales level required to make an after-tax profit of GH¢21,150, assuming Quickspray Ltd is in the 25% tax bracket.
iii) Margin of safety if the target after-tax profit of GH¢21,150 is achieved.

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  • 1 Marks

QTB – Nov 2014 – L1 – SA – Q15 – Mathematics of Business Finance

Determines the smallest number of units to produce for break-even.

Assume that the standard selling price of a medium-size detergent produced by BICU Nigeria Limited is N250 per unit. If the total fixed cost is N85,000 and the cost of producing each unit is N130, what is the smallest number of units which the company should produce in order to break even?
A. 709
B. 708
C. 707
D. 706
E. 700

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  • 20 Marks

MI – Nov 2014 – L1 – SB – Q3 – Cost-Volume-Profit (CVP) Analysis

This question involves break-even point, target profit, and the effect of cost changes on break-even.

A company that operates below break-even point year-after-year needs to be restructured.

a. What is break-even point? (2 Marks)

b. Elebu Nig. Plc. manufactures four products at its GBOOPA Plant in Olorungbebe Industrial Estate.

The company sold 450,000 units of its product at N60 per unit. Variable costs are N45 per unit, while the fixed cost incurred evenly throughout the year amounted to N2,916,000, which comprises of manufacturing costs of N1,800,000 and selling costs of N1,116,000.

You are required to calculate:
i. The break-even point in units and in value (5 Marks)
ii. The number of units that must be sold to earn an income of N225,000 before income tax (3 Marks)
iii. The number of units that must be sold to generate after-tax profit of N300,000 if the income tax rate is 40% (5 Marks)
iv. The number of units required to break-even if the fixed cost increases by 2.5% and variable cost increases by 5% (5 Marks)

 

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  • 1 Marks

MI – May 2022 – L1 – SA – Q10 – Cost-Volume-Profit (CVP) Analysis

Determining monthly sales required to achieve a target profit.

PQR produces a single product QR which sells for ₦500 with a variable cost of ₦340. The fixed cost of ₦5,520,000 was accrued evenly over the year and the company wants to achieve a monthly target profit after tax of ₦960,000. Considering a company tax rate of 20%, calculate the level of monthly sales required to achieve the target profit.

A. 40,500 units
B. 39,500 units
C. 34,500 units
D. 10,375 units
E. 8,875 units

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  • 1 Marks

MI – May 2021 – L1 – SA – Q12 – Cost-Volume-Profit (CVP) Analysis

Calculate the break-even sales based on given budget data.

You are given the following data:

Description Amount (₦)
Budgeted sales 500,000
Budgeted contribution 200,000
Budgeted profit 50,000

The break-even sales is:

A. ₦475,000
B. ₦450,000
C. ₦375,000
D. ₦350,000
E. ₦125,000

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  • 1 Marks

MI – Nov 2023 – L1 – SA – Q5 – Cost-Volume-Profit Analysis

Calculating the break-even point given sales figure and margin of safety.

What is the break-even point where sales figure is ₦15,000,000 and margin of safety is 30%?
A. ₦2,000,000
B. ₦3,000,000
C. ₦6,500,000
D. ₦10,500,000
E. ₦12,000,000

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  • 1 Marks

MI – Mar-Jul 2020 – L1 – SA – Q3 – Cost-Volume-Profit (CVP) Analysis

Calculate the monthly sales required to achieve the target profit considering the fixed cost and tax rate.

XYZ Company produces a single product XEE selling for N20 and has a variable cost of N12 per unit. If fixed cost of N2.4 million accrues evenly over the year and the company wants to achieve a monthly target profit after tax of N526,400 considering a company tax rate of 30%, calculate the level of monthly sales required to achieve the target profit in units.

A. N365,800
B. N300,000
C. N119,000
D. N90,800
E. N71,060

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  • 1 Marks

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.

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

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  • 1 Marks

MI – May 2015 – L1 – SA – Q3 – Cost-Volume-Profit (CVP) Analysis

Calculate the variable cost per unit based on the given dat

The variable cost per unit is
A. N8.00
B. N7.50
C. N6.25
D. N5.50
E. N5.00

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  • 15 Marks

MA – Nov 2017 – L2 – Q5 – Standard Costing and Variance Analysis

Calculate standard selling price, variances, break-even point, and margin of safety for a company using standard marginal costing.

Zealow Ltd has just introduced a new standard marginal costing system to assist in the planning and control of the production activities for the single product which the company manufactures, “The Stand.” The system became operational on 1 March 2017.

The Management Accountant has consulted with the Senior Engineer and they have agreed on the following standard specifications to manufacture one unit of the product known as “The Stand”:

  • Direct materials: 4kg @ GH¢1.75 per kg
  • Direct labour: 2 hours @ GH¢10 per hour
  • Variable overhead: 2 hours @ GH¢8.25 per hour

The Marketing Director has advised that in Zealow Ltd’s industry, the budgeted selling price is normally calculated to achieve a mark-up of 30% on cost.

The budgeted level of production and sales activity has been agreed with both production managers and sales staff at 24,000 units per month.

The actual results for the month of March 2017 are as follows:

  • Sales: 22,000 units yielding a total revenue of GH¢1,276,000
  • Production: 23,000 units
  • Direct Materials: 90,000 kgs at a cost of GH¢162,000
  • Direct labour: 48,000 hours at a cost of GH¢576,000
  • Variable overhead: GH¢350,000

Required:

a) Calculate the standard selling price of one unit of “The Stand” and prepare a summary budgeted profit statement for Zealow Ltd for the month of March 2017.
b) Calculate the relevant variances for March 2017 under the headings of sales, materials, labour, and overheads.
c) Zealow Ltd uses a standard marginal costing system and therefore fixed costs have been ignored in the calculations shown above. Assuming that the fixed costs for the company are estimated to be GH¢1,879,200 per annum, calculate the monthly sales in both units and value that will be required to break-even and estimate the margin of safety, based on the current budget levels.

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  • 20 Marks

MA – Nov 2020 – L2 – Q5 – High/Low Analysis, Cost-Volume-Profit (CVP) Analysis

Determine maintenance costs using the high-low method, and calculate break-even point, required sales for target profit, and margin of safety for Quickspray Ltd.

Quickspray Ltd offers professional car spraying services at Suame Magazine. The company is planning its activities for the month of June 2018 for its saloon car spraying section. The company charges a service fee of GH¢1,000 and incurs fixed cost (excluding fixed maintenance cost) and variable cost per unit (excluding variable maintenance cost) of GH¢35,000 and GH¢644.39 respectively for spraying a saloon car.

The following data also relates to Quickspray Ltd on the maintenance hours of its key machine, revenue, and profit for the six months ended April 2018:

Month Maintenance Hours Revenue (GH¢) Profit (GH¢)
November 2017 1,200 19,000 700
December 2017 1,425 24,000 1,425
January 2018 1,410 20,100 650
February 2018 1,400 20,000 1,000
March 2018 1,175 18,000 (125)
April 2018 1,275 19,000 175

Total fixed cost increases by GH¢1,120 when maintenance hours go beyond 1,400.

Required:

a) Determine the total maintenance cost of production, using the high-low method if:

i) Maintenance hours for May are budgeted to be 1,520.
ii) Maintenance hours for June are budgeted to be 1,075.

b) Calculate for the month of May the:

i) Break-even point in units and value.
ii) Sales level required to make an after-tax profit of GH¢21,150, assuming Quickspray Ltd is in the 25% tax bracket.
iii) Margin of safety if the target after-tax profit of GH¢21,150 is achieved.

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