Question

A business makes​ 2,000 units of a particular product. It spent​ £24,000 on material and it paid its operatives​ £40,000. Fixed costs of running the factory were​ £50,000. The sales force were also paid​ £18,000 and the head office costs were​ £100,000. In order to break even the selling price per unit will have to​ be:

A. £84
B. £32
C. £116
D. £66

Answer 1

The break-even selling price per unit is calculated by dividing the total costs (£232,000) by the number of units (2,000), resulting in £116 per unit.

Step-by-step explanation:

To calculate the break-even price per unit, we need to sum all the costs that the company incurs and divide that total by the number of units produced. In this scenario, the total costs are the sum of material costs (£24,000), operative wages (£40,000), fixed factory costs (£50,000), sales force payments (£18,000), and head office costs (£100,000). Adding these together gives us a total cost of £232,000. To find the break-even selling price per unit, we divide the total costs by the number of units, which is 2,000. Therefore, the break-even selling price per unit will be £232,000 ÷ 2,000 units = £116 per unit, which corresponds to answer choice C.