Question
Calculate the Break-even point from the following
information. Fixed overheads = Rs.60,000 Selling Price per unit = Rs.30 Direct material cost per unit = Rs.12 Direct Labour cost per unit = Rs.6 Variable overheads are absorbed as 50% of direct labour cost Trade discount = 10% ÂSolution
Break even output = Fixed overheads/ contribution per unit Contribution per unit = Selling price – Variable cost per unit ·        Realized selling price = Selling price – trade discount = 30 - (10%*30) = 27 ·        Variable costs = direct material + direct labour + variable O/H = 12 + 6 + (50% of 6) = 21 Thus, Contribution per unit = 27-21 = 6 Break even output = 60000/6 = 10,000 units
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