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.

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- November 23, 2015 at 7:55 am #284682
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 100000What is the breakeven time for this product?

A. 4 months B. 8 months

C.10 months D. 12 monthsSir, 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 #284691In 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 840,000So 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 #284704Thank you very much , Sir..

November 23, 2015 at 1:42 pm #284721You are welcome 🙂

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