Business – 5.4 Costs – Break-even analysis | e-Consult
5.4 Costs – Break-even analysis (1 questions)
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First calculate the contribution margin per unit:
Contribution margin = Selling price – Variable cost = £25 – £15 = £10 per unit.
Then apply the break‑even formula.
| Item | Value |
| Fixed Costs | £50,000 |
| Contribution per Unit | £10 |
| Break‑even Units | £50,000 ÷ £10 = 5,000 units |
| Break‑even Sales Value | 5,000 units × £25 = £125,000 |
Thus the company must sell 5,000 units, generating £125,000 in revenue, to cover all costs.