[amp_mcq option1=”Variable cost per unit” option2=”Datum per unit” option3=”Fixed cost per unit” option4=”Profit volume ratio” correct=”option3″]
The correct answer is C. Fixed cost per unit.
The break-even point is the point at which a company’s total revenue equals its total costs. At this point, the company is neither making nor losing money. To calculate the break-even point, you need to know the following:
- Fixed costs: These are costs that do not change with the number of units produced or sold, such as rent, insurance, and salaries.
- Variable costs: These are costs that change with the number of units produced or sold, such as the cost of materials and labor.
- Selling price per unit: This is the price that the company charges for each unit of its product.
Once you know these three numbers, you can use the following formula to calculate the break-even point:
Break-even point = Fixed costs / (Selling price per unit – Variable cost per unit)
For example, let’s say that a company has fixed costs of $100,000, a variable cost per unit of $5, and a selling price per unit of $10. In this case, the break-even point would be:
Break-even point = $100,000 / ($10 – $5) = 20,000 units
This means that the company needs to sell 20,000 units before it starts making a profit.
The other options are not correct because they do not represent the costs that are used to calculate the break-even point.
- Variable cost per unit: This is a cost that changes with the number of units produced or sold. It is not used to calculate the break-even point because it does not represent the total costs of the company.
- Datum per unit: This is a term that is not used in business. It is not used to calculate the break-even point.
- Profit volume ratio: This is a ratio that measures the relationship between a company’s profit and its sales. It is not used to calculate the break-even point.