CMA Foundation · Fundamentals of Financial and Cost Accounting · Application of Cost Accounting for Business Decisions
A company sells a product at ₹50 per unit. Variable cost is ₹30 per unit and total fixed cost is ₹60,000. What is the break-even point in units?
The break-even point is 3,000 units. Contribution per unit is ₹20 (selling price ₹50 less variable cost ₹30), and fixed cost of ₹60,000 divided by this contribution gives the number of units needed to cover fixed cost.
- A2,000 units
- B3,000 unitsCorrect
- C1,200 units
- D6,000 units
Explanation
Contribution per unit = 50 - 30 = ₹20. Break-even units = 60,000 / 20 = 3,000. Dividing by the selling price (60,000/50 = 1,200) is wrong because fixed cost is recovered from contribution, not from sales price.
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