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Breakeven point

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA PM Exams › Breakeven point

  • This topic has 1 reply, 2 voices, and was last updated 3 years ago by John Moffat.
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  • January 26, 2022 at 9:14 pm #647550
    shahana
    Member
    • Topics: 2
    • Replies: 0
    • ☆

    Hi Sir,

    I was trying to workout the below question but I did not understand how they have arrived in contribution per unit to find out the Breakeven point.

    Question : A company has a fixed cost of $1.3 million, variable costs are 55% of sales up to a sales level of $1.5 million, but a higher volumes of production and sales, the variable cost for incremental production units falls to 52% of sales.

    What is the breakeven point in sales revenue, to the nearest 1000?

    January 27, 2022 at 9:16 am #647578
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54700
    • ☆☆☆☆☆

    If the variable costs are 55% os the sales then the contribution must be 100 – 55 = 45% of the sales (so this is the CS ratio. It will be 45% up to a sales level of 1.5M and will then change to 48%.

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