Question

"Fox's Biscuits are considering selling their Caffé Thins at £1.74 per packet. Fixed monthly costs are £160 000 with variable costs at 53 pence a packet. Using this data, calculate the monthly break-even level of output for Caffè Thins. You are advised to show your working.

Answer 1

The break-even level of output for Fox's Biscuits' Caffè Thins is approximately 132,231 packets, calculated using the fixed costs of £160,000, a selling price of £1.74, and variable costs of 53 pence per packet.

Step-by-step explanation:

To calculate the monthly break-even level of output for Fox's Biscuits' Caffè Thins, we can follow the break-even formula which is Fixed Costs ÷ (Selling Price per Unit - Variable Cost per Unit). Here, the fixed costs are £160,000, the selling price per packet is £1.74, and the variable costs are 53 pence (£0.53) per packet. Let's calculate:

Break-even level of output = £160,000 ÷ (£1.74 - £0.53) = £160,000 ÷ £1.21

Break-even level of output = 132,231 packets approximately

The company needs to sell approximately 132,231 packets of Caffè Thins to cover both their fixed and variable costs, without making a profit or a loss.