A business’s fixed costs are £30 000, selling price per unit is £5, and total variable costs per unit are £2.50. Which ONE of the following is the break-even level of output (to the nearest whole number)?
Select ONE answer only:
- 12 500 units
- 12 000 units
- 10 000 units
- 8 500 units
- 6 667 units
Show your workings to arrive at your answer, and explain and justify your reasons:
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This is multiple choice question is suitable for Business Studies KS4 classes.
The answer is 2 – Break even level of output = Fixed costs / Contribution per unit. Contribution per unit = Selling price per unit – Variable costs per unit. Therefore the breakeven level of output is: £30 000 / (£5 – £2.50) = £30 000 / £2.50 = 12 000 units.
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