PRC-2 · Chapter 2 · Question 18 of 45
A firm plans to sell a product for Rs. 50 per unit. The variable cost of production is Rs. 42 per unit, and the total fixed cost is Rs. 64,000. Assuming linear functions, what is the break-even volume of sales?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) 8,000 units
Explanation
The contribution margin per unit is Selling Price - Variable Cost (50 - 42) = Rs. 8. The break-even point is Fixed Costs / Contribution Margin = 64,000 / 8 = 8,000 units.
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