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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%

 

A 5000 Correct Answer Incorrect Answer
B 10000 Correct Answer Incorrect Answer
C 6666 Correct Answer Incorrect Answer
D 2500 Correct Answer Incorrect Answer
E 20000 Correct Answer Incorrect Answer

Solution

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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