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Breakeven

Forums › ACCA Forums › ACCA PM Performance Management Forums › Breakeven

  • This topic has 3 replies, 2 voices, and was last updated 7 years ago by John Moffat.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • November 23, 2015 at 7:55 am #284682
    juthie
    Member
    • Topics: 1
    • Replies: 1
    • ☆

    I am unable to understand the question bellow –

    the cost for design and development of a new product are expected to be $800000. The time from original product concept to market launch will be 8 months. The expected s.p. for the product is $8 p.u. and cost of sales will be $5. Expected sales per month in the period launch are :

    Month sales units
    1 40000
    2 60000
    3 80000
    4 100000

    What is the breakeven time for this product?

    A. 4 months B. 8 months
    C.10 months D. 12 months

    Sir, can you help me to solve the question as I can’t understand why the answer is ‘d’ that is 12 months?

    November 23, 2015 at 9:59 am #284691
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 51532
    • ☆☆☆☆☆

    In month 1 of the launch period the contribution is 40,000 x $3 = 120,000
    In month 2 it is 60,000 x $3 = 180,000. So the total is now 300,000.
    In month 3 it is 80,000 x $3 = 240,000, so the total is now 540,000.
    In month 4 it is 100,000 x $3 = $300,000, so the total is now 840,000

    So it takes 4 months to breakeven (to get the 800,000).

    BUT the launch period does not start for 8 months, so it is 4 months after the 8 months – i.e. a total of 12 months.

    November 23, 2015 at 11:20 am #284704
    juthie
    Member
    • Topics: 1
    • Replies: 1
    • ☆

    Thank you very much , Sir..

    November 23, 2015 at 1:42 pm #284721
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 51532
    • ☆☆☆☆☆

    You are welcome 🙂

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    Posts
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