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Question : If the fixed cost of the factory producing candles is Rs. 20,000 the selling price is Rs. 30 per dozen candles and the variable cost is Rs. 1.5 per candle, what is the break-even quantity?

Option 1: 20000

Option 2: 10000

Option 3: 15000

Option 4: 12000


Team Careers360 16th Jan, 2024
Answer (1)
Team Careers360 22nd Jan, 2024

Correct Answer: 20000


Solution : The correct option is : 20000

Break-even quantity = Fixed Costs / (Selling Price per Unit - Variable Cost per Unit)

In this case:

Fixed Costs = Rs. 20,000

Selling Price per unit = Rs. 30 per dozen candles = Rs. 30 / 12 = Rs. 2.5 per candle

Variable Cost per unit = Rs. 1.5 per candle

Break-even quantity = 20,000 / (2.5 - 1.5)

Break-even quantity = 20,000 / 1

Break-even quantity = 20,000

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