Scenario:
A company produces cups with the following cost structure:
- Selling price per cup: ₹12
- Variable cost per cup: ₹10
- Fixed cost: ₹25,000
Questions:
What is the break-even point in units?
- A) 10,000 units
- B) 12,000 units
- C) 12,500 units
- D) 15,000 units
Answer: C) 12,500 units
Explanation: Break-even point = Fixed cost / (Selling price – Variable cost) = ₹25,000 / (₹12 – ₹10) = 12,500 units.
What is the break-even point in sales?
- A) ₹1,00,000
- B) ₹1,20,000
- C) ₹1,50,000
- D) ₹2,00,000
Answer: B) ₹1,20,000
Explanation: Break-even sales = Break-even units × Selling price = 12,500 units × ₹12 = ₹1,50,000.
What is the profit if 50,000 cups are sold?
- A) ₹50,000
- B) ₹75,000
- C) ₹1,00,000
- D) Loss
Answer: C) ₹1,00,000
Explanation: Profit = (Selling price – Variable cost) × Number of units sold – Fixed costs = (₹12 – ₹10) × 50,000 – ₹25,000 = ₹1,00,000.
How many cups should be sold to earn a profit of ₹2,00,000?
- A) 1,00,000 cups
- B) 1,12,500 cups
- C) 1,15,000 cups
- D) 1,20,000 cups
Answer: B) 1,12,500 cups
Explanation: Required sales = (Fixed cost + Desired profit) / (Selling price – Variable cost) = (₹25,000 + ₹2,00,000) / ₹2 = 1,12,500 cups.