Worked Example On Cost Volume Profit Analysis (2)

Question A

ABC Limited sells a product at $4 per unit and the variable cost of the product is $2 per unit. The current fixed cost is $30,000. What is the break-even point, the firm must produce?

Suggested Solution To Question A

Applying the following formula:

=Fixed costs/Selling price/unit –Variable cost per unit

= Break-even
= $30,000/$4-$2
=15,000unit



Question B
Multiproducts Ltd expects a total sales of $200,00 for this year. Its variable costs totaled $120,000 and fixed costs $40,000. What is its sales volume in order to break-even

Suggestion solution to Question B

Formula = Fixed costs /(Sales-Variable costs/Sales)
=$40,000/($200,000-$120,000)/$200,000
=$40,000/$80,000/$200,000
=$40,000 x $200,000/$80,000
=$100,000