Break-even questions, covering a fixed cost from margin
A break-even question gives what a unit sells for, what it costs to make and a fixed cost to cover. Take the cost from the price to find the margin each unit earns, then divide the fixed cost by that margin.
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One question of this type, worked in full
Work it out on paper, then open Check your answer to see the full solution.
A unit sells for 160 euros and costs 128 euros to produce. Fixed costs are 48,000 euros a month. How many units must be sold in a month to cover the fixed costs exactly?
Check your answer
- Each unit sells for 160 euros and costs 128 euros to make, so it leaves a margin of 160 − 128 = 32 euros.
- Only that margin goes towards the fixed costs, so divide them by it: 48,000 ÷ 32 = 1,500 units a month.
Answer: 1,500 units. Our suggested time: 50 s.
Other ways this question type goes wrong
Divided by cost
Dividing the fixed costs by the production cost, which ignores the selling price.
Revenue, not units
Dividing correctly and then multiplying by the price.
Margin as answer
Stopping once the margin is worked out.
What the review gives you after you submit
You get the working for every question, the answer you chose beside the right one, and the mistake behind each wrong option. Nothing is sent anywhere while you work.