Question

A company produces a standard product. The following details are given.

February
Sales​ (units): 200
Sales revenue: £5,000
Profit: £1,000

March
Sales​ (units): 350
Sales revenue: £8,750
Profit: £2,500

The​ break-even point in units​ is:
A. 175 units
B. 100 units
C.cannot be ascertained
D. 275 units

Answer 1

The break-even point in units cannot be ascertained based on the given information.

Step-by-step explanation:

The break-even point in units is the point at which a company neither makes a profit nor incurs a loss. To calculate the break-even point, we need to determine the number of units at which the total revenue equals the total cost.

In this case, the total revenue for February is £5,000 and the total cost is £4,000, resulting in a profit of £1,000. The break-even point can be calculated by dividing the fixed cost (£4,000) by the contribution margin per unit (£1,000). In February, the contribution margin per unit is (£1,000/200 units = £5/unit), so the break-even point is £4,000/£5 = 800 units.

Similarly, for March, the break-even point can be calculated by dividing the fixed cost (£4,000) by the contribution margin per unit (£2,500/350 units = £7.14/unit). So the break-even point in March is £4,000/£7.14 ≈ 560 units.

Therefore, the break-even point in units is between 560 and 800 units, so the correct option is C. cannot be ascertained.