Accounting Multiple Choice Question – 5 August 2022

The budget for a product is shown.

• unit sales 620 000
• selling price per unit – £31
• variable cost per unit – £16
• contribution per unit – £15
• fixed costs £7 500 000

If the fixed costs rise to £7 800 000, the selling price is reduced to £29 per unit, and the variable cost remains unchanged at £16 per unit, the sales are likely to reach 660 000 units.

By what percentage will the revised break-even point increase?

Select ONE answer:

1. 3.8%
2. 4.0%
3. 16.7%
4. 20.0%

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 4

1. Not correct
2. Not correct
3. Not correct
4. Correct ==> old = £7,500,000 / £15 = 500,000 units BEP ==> new = £7,800,000 / £13 new contribution per unit = 600,000 units which is a 20% increase.

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