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The indirect cost of a plant is Rs 4,00,000 per year. The direct cost is Rs 20 per product. If the average revenue per product is Rs 60, the break-even point is:
- a)10000 products
- b)20000 products
- c)40000 products
- d)60000 products
Correct answer is option 'A'. Can you explain this answer?
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Verified Answer
The indirect cost of a plant is Rs 4,00,000 per year. The direct cost ...
Sales cost = Fixed cost + variable cost [where, N = Number of variable]
or, 60 × N = 4,00,000 + 20 × N
or, 40N = 4,00,000
or, N = 10000 Products
or, 60 × N = 4,00,000 + 20 × N
or, 40N = 4,00,000
or, N = 10000 Products
Most Upvoted Answer
The indirect cost of a plant is Rs 4,00,000 per year. The direct cost ...
Break-even point is the point at which total revenue equals total cost, resulting in neither profit nor loss. To calculate the break-even point, we need to determine the number of products that need to be sold to cover both the direct cost and the indirect cost.
Direct cost per product: Rs 20
Indirect cost per year: Rs 4,00,000
Let's assume the break-even point is x, the number of products that need to be sold.
- Calculating the total direct cost:
Total direct cost = Direct cost per product * Number of products
Total direct cost = Rs 20 * x
- Calculating the total cost:
Total cost = Total direct cost + Indirect cost
Total cost = Rs 20 * x + Rs 4,00,000
- Calculating the total revenue:
Total revenue = Average revenue per product * Number of products
Total revenue = Rs 60 * x
- Setting up the break-even equation:
Total revenue = Total cost
Rs 60 * x = Rs 20 * x + Rs 4,00,000
- Solving for x:
Rs 60 * x - Rs 20 * x = Rs 4,00,000
Rs 40 * x = Rs 4,00,000
x = Rs 4,00,000 / Rs 40
x = 10,000
Therefore, the break-even point is 10,000 products.
Option 'A' is the correct answer.
Direct cost per product: Rs 20
Indirect cost per year: Rs 4,00,000
Let's assume the break-even point is x, the number of products that need to be sold.
- Calculating the total direct cost:
Total direct cost = Direct cost per product * Number of products
Total direct cost = Rs 20 * x
- Calculating the total cost:
Total cost = Total direct cost + Indirect cost
Total cost = Rs 20 * x + Rs 4,00,000
- Calculating the total revenue:
Total revenue = Average revenue per product * Number of products
Total revenue = Rs 60 * x
- Setting up the break-even equation:
Total revenue = Total cost
Rs 60 * x = Rs 20 * x + Rs 4,00,000
- Solving for x:
Rs 60 * x - Rs 20 * x = Rs 4,00,000
Rs 40 * x = Rs 4,00,000
x = Rs 4,00,000 / Rs 40
x = 10,000
Therefore, the break-even point is 10,000 products.
Option 'A' is the correct answer.
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The indirect cost of a plant is Rs 4,00,000 per year. The direct cost is Rs 20 per product. If the average revenue per product is Rs 60, the break-even point is:a)10000 productsb)20000 products c)40000 productsd)60000 productsCorrect answer is option 'A'. Can you explain this answer?
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