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
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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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