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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. 1.50 per candle, what is the Break-even Quantity?

Option 1: 20,000

Option 2: 10,000

Option 3: 15,000

Option 4: 12,000


Team Careers360 14th Jan, 2024
Answer (1)
Team Careers360 15th Jan, 2024

Correct Answer: 20,000


Solution : The correct option is 20,000 .

The Break-even quantity is the level of production at which total cost equals total revenue. It can be calculated by using the following formula:

In this case:

Fixed Cost = Rs. 20,000 Selling Price per dozen candles = Rs. 30 Variable Cost per candle = Rs. 1.50

First, let's convert the selling price per dozen candles to the price per candle:

Selling Price per candle = Rs. 30/12 candles = Rs. 2.50 per candle

Break-even quantity = 20,000/(2.50 - 1.50)

Break-even quantity = 20,000/1

Break-even quantity = 20,000

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