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Break even point can be defined as the business volume that balances total costs with total gains. At break even volume, in other words, net cash flow equals zero.
How many product units must we sell to break even?
The simple break even formula below shows how these inputs produce the break even quantity Q. Suppose for instance, a manufactured item is produced and sold with these values:
Q = F/(P-V)
F = Total Fixed costs = 1,60,000
v = Variable cost per unit = 20
P = Selling price per unit = X
Q = Break Even Quantity
In respect of a firm having fixed cost of Rs. 160000 and variable cost Rs. 20 per unit, what is the amount of selling price, if break even no. of units is 4,000?
a. Rs. 20
b. Rs. 40
c. Rs. 60
d. Rs. 80
Ans - c
The formula finds the Selling Price per unit as follows:
4000 = 160000 / (X – 20)
4000 (X - 20) = 160000
4000X - 80000 = 160000
4000X = 160000 + 80000
X = 240000 / 4000
x = 60
So, the Selling Price per unit = Rs. 60
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A firm sells 4000 units and earns profit of Rs. 80000. If fixed cost is Rs. 60000, what is the break even no. of units?
a. 2000
b. 2500
c. 3000
d. 3500
Ans - c
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A firm has been producing 4000 units of an item with its break even at 2000 units. Now it increases the no. of units produced to 5000. What is the change in the break even no. of units ?
a. 3000
b. 2000
c. 1000
d. nil
Ans - d
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A company had selling price per unit of Rs.100. Its Break even point units are 2000. If variable cost is Rs.60, what is the fixed cost?
a. Rs. 50000
b. Rs. 60000
c. Rs. 70000
d. Rs. 80000
Ans - d
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At 40%, the capacity utilization break even point, the total no. of units produced is 5000. What is the no. of break even units?
a. 1500
b. 1800
c. 2000
d. 2500
Ans - c
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A company is forced to sell its product at Rs. 90 due to competition, which it had been selling at Rs.100 earlier. There is no change in the variable cost. Previously the Break even point units were 2000 and now 2667. What is the variable cost, if fixed cost is Rs. 80000/-?
a. Rs 60
b. Rs 50
c. Rs.40
d. Rs.30
Ans - a
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