A product sells for £30 per unit. Variable costs are £18 per unit and fixed costs are £48,000 per month. What is the break-even point in units?
Answer and explanation
Correct answer: C. 4,000 units
- Step 1: Contribution per unit = £30 − £18 = £12.
- Step 2: Break-even units = fixed costs ÷ contribution per unit.
- Step 3: £48,000 ÷ £12 = 4,000 units.
Answer
4,000 units.
Why not the others: 1,600 units: This divides fixed costs by the selling price (£48,000 ÷ £30). 2,667 units: This divides fixed costs by the variable cost per unit. 2,000 units: This uses a contribution of £24, but the contribution is £12 per unit.
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