ACCA Applied Skills · Performance Management · Cost-volume-profit analysis (CVP)
Marlow Ltd sells a single product at $40 per unit. Variable costs are $24 per unit and fixed costs are $96,000 per year. What is the break-even point in units?
Break-even is 6,000 units. Contribution per unit is $16 (selling price $40 less variable cost $24), and dividing fixed costs of $96,000 by this contribution gives the number of units needed to cover fixed costs exactly.
- A2,400 units
- B4,000 units
- C6,000 unitsCorrect
- D3,000 units
Explanation
Contribution per unit = 40 - 24 = $16. Break-even = 96,000 / 16 = 6,000 units. Dividing fixed costs by the selling price (96,000/40 = 2,400) ignores variable costs and is wrong.
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