Question

A company produces a commodity with ₹ 24,000 as fixed cost. The variable cost estimated to be 25% of the total revenue received on selling the product, is at the rate of ₹ 8 per unit. Find the break-even point.

Answer 1

Suppose that x number of the unit be produced and sold. 

As each unit’s variable cost is 25% of revenue 

The variable cost of x units = 25 % of ₹ 8x = ₹ 2x 

Total cost of producing x units C(x) = TFC + TVC = ₹(24000 + 2x) 

Price of one unit = ₹ 8 

Total revenue of selling x units = R(x) = ₹ 8x 

At break-even values, 

C(x) = R(x) 

⇒ 24000 + 2x = 8x 

⇒ 24000 = 6x 

⇒ x = 4000