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The initial cost of making a product is 1,00,000 and the variable cost per unit is 40. If its selling price is 80 per unit, what would be the break-even quantity?
1. 2500 units
2. 3500 units
3. 5000 units
4. 7000 units

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Correct Answer - Option 1 : 2500 units

Concept:

\({\rm{Break\;even\;point}} = \frac{{Total\;fixed\;cost\;\left( {TFC} \right)}}{{Price\;per\;unit\;\left( P \right) - Variable\;cost\;\left( {V.C.} \right)}}\)

Calculation:

Given:

Total fixed cost (TFC) = 100000, SP = 80, VC = 40.

\(Break~even ~point = {100000\over80-40} =2500\).

Hence, the quantity of break-even is 2500 units.

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