Question

Fixed cost of an equipment is Rs. 6,000, if variable cost of an item it produces is Rs. 2 per item and sells it for Rs. 7 per item, what is the break-even point?

• A. 1200 items
• B. 3000 items
• C. 7000 items
• D. 6500 items

Answer 1

Answer:

A. 1200 items

Given: TFC = Rs. 6000, P = Rs. 7, VC = Rs. 2 per item;

$Break even point =\frac {Total Fixed Cost (TFC)}{Price per unit (P) -Variable cost (V.C)}$

$Break even point = \frac {6000}{7-2} = 1200$