Multiple choice

If the sales are Rs. 6000, variable cost Rs. 3600 and fixed cost Rs. 2000, the Break-even point will be:

  1. 5000 units

  2. 5400 units

  3. 6000 units

  4. 4000 units

Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Break-even point (BEP) in sales value = Fixed Cost / Contribution Margin Ratio. Contribution = Sales - Variable Cost = 6000 - 3600 = 2400. Contribution Margin Ratio = 2400/6000 = 0.4. BEP = 2000 / 0.4 = 5000. This is the sales level where total revenue equals total costs (fixed + variable).