Question

The annual fixed costs for a plant are 100 000 TL and the variable costs are 140 000 TL at 70% capacity and the annual profit is 280 000 TL. What is the break-even point in units of production if the selling price per unit is 40 TL?

Answer 1

Solution:

Fixed cost = 100000 TL

Variable cost = 140000 TL

Total cost = 100000 TL + 140000 TL = 240000 TL

Total units sold = (280000/40) = 7000 units

Variable cost per unit

= Variable cost/total units sold

= 140000/7000 unit per TL

= 20 unit per TL

Therefore,

Break-even Point (Units)

= Fixed Costs / (Revenue Per Unit – Variable Cost Per Unit)

= (100000)/(40 - 20)

= 5000 units