Final answer:
To calculate the Pear Company's break-even point in units, first determine the price per unit (£2.50) and variable cost per unit (£1.25), then divide the sum of fixed costs (£50,000) by the contribution margin per unit (£1.25), resulting in a break-even point of 40,000 units. Therefore, the correct option is C.
Step-by-step explanation:
The break-even point in units is the level of sales at which a company's total revenues equal its total costs, resulting in no net profit or loss. To calculate the break-even point in units for the Pear Company, we need to divide the total fixed costs by the contribution margin per unit. The contribution margin per unit is the difference between the selling price per unit and the variable costs per unit. In this case, we have to calculate the selling price per unit first:
£500,000 / 200,000 units = £2.50 per unit
Now we calculate the variable cost per unit:
(£170,000 + £80,000) / 200,000 units = £1.25 per unit
And the contribution margin per unit:
£2.50 (selling price) - £1.25 (variable cost) = £1.25 per unit
Finally, to find the break-even point in units, we use this formula:
(£30,000 + £20,000) / £1.25 = 40,000 units
Therefore, the break-even point for the Pear Company is 40,000 units.