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Q. |
If the fixed costs of a factory producing candles is Rs 20,000, selling price is Rs 30 per dozen candles and variable cost is Rs 1.5 per candle, what is the break-even quantity? |
A. | 20000 |
B. | 10000 |
C. | 15000 |
D. | 12000 |
Answer» A. 20000 | |
Explanation: Breakeven quantity is the number of incremental units that the firm needs to sell to cover the cost of a marketing program or other type of investment. It is given by the formula: BEQ = FC / (P-VC) Where BEQ = Break-even quantity FC = Total fixed costs P = Average price per unit, and VC = Variable costs per unit, According to the question, Price per unit = 30/12 = Rs. 2.5 So 20000/ (2.5-1.5) = 20000/1= Rs. 20,000 |
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