Business Studies – 4.4.3 Break-even analysis | e-Consult
4.4.3 Break-even analysis (1 questions)
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Answer:
To calculate the break-even output, we use the formula: Break-Even Output = Fixed Costs / (Selling Price per Unit - Variable Cost per Unit)
In this case:
- Fixed Costs = £10,000
- Selling Price per Unit = £12
- Variable Cost per Unit = £5
Therefore:
Break-Even Output = £10,000 / (£12 - £5) = £10,000 / £7 = 1428.57
Since you cannot produce a fraction of a unit, the company needs to produce 1429 units to break even.