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Break Even Point

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Question

A company manufacturing rivets, whose selling prices is Rs. 10 per packet. The veriable costs are Rs. 8 per packet. If the annual fixed costs of the firm are estimated as Rs.100000. If the firm has an estimated capacity of 80000 units of the rivet packets. The margin of safety

A

40000 units

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B

80000 units

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C

50000 units

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D

30000 units

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Solution

The correct option is D 30000 units
Break-even point units $= \frac{100000}{10 - 8} = 50000$

Capacity = 80000

Margin of safety = 80000 - 50000 = 30000

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