A business’s fixed costs are £60 000, selling price per unit is £10, 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:
- 4 250 units
- 7 000 units
- 8 000 units
- 8 500 units
- 9 667 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 3 – 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: £60 000 / (£10 – £2.50) = £60 000 / £7.50 = 8 000 units.
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