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Breakeven revenue

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

  • This topic has 1 reply, 2 voices, and was last updated 5 years ago by AvatarJohn Moffat.
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  • November 2, 2020 at 4:35 pm #593871
    AvatarNikitagarwal
    Participant
    • Topics: 154
    • Replies: 147
    • ☆☆☆

    Hello Sir,
    I have the below question:
    Edward sells two products with selling prices and contributions as follows: 
     Product F Product G 
    Selling price $40 $20 
    Contribution $10 $4 
    Budgeted sales units 150,000 100,000 
    Edwards’s fixed costs are $1,400,000 per year. 
    Edward now anticipates that more customers will buy the cheaper product G and that 
    budgeted sales will be 150,000 units for each product. 
    If this happens, what would happen to the breakeven revenue? 
    A Increase by the extra revenue from G of 50,000 × $20/u or $1,000,000 
    B Decrease by the extra revenue from G of 50,000 × $20/u or $1,000,000 
    C Increase by a different amount 
    D Decrease by a different amount 

    As per answer it is C.. and as per my understanding it could be A as we will be calculating the extra revenue on the additional sales..
    Please help.!
    Thanks in advance

    November 3, 2020 at 9:57 am #593914
    AvatarJohn Moffat
    Keymaster
    • Topics: 57
    • Replies: 54846
    • ☆☆☆☆☆

    The total revenue will increase by $1,000,000, but the question asks for the breakeven revenue – not for the effect on the total revenue.

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