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Pintu runs a company that sells ball pens. They first determined the fixed costs, which included Property tax, salaries, etc, which sums up to 1,00,000. The variable cost for manufacturing a pen is ₹ 2 per unit. Hence, they sell the pen at a price of ₹ 10. If one has to determine the break-even point, that would come up to:
  • a)
    5,000
  • b)
    20,000
  • c)
    12,500
  • d)
    15,000 
Correct answer is option 'C'. Can you explain this answer?
Most Upvoted Answer
Pintu runs a company that sells ball pens. They first determined the f...
Break-even point refers to the level of sales at which a company neither makes a profit nor incurs a loss. It is the point where total revenue equals total costs. In order to determine the break-even point, we need to calculate the number of units that need to be sold to cover both fixed and variable costs.

1. Calculate the Contribution Margin per unit:
The contribution margin is the difference between the selling price per unit and the variable cost per unit. In this case, the selling price is Rs. 10 and the variable cost is Rs. 2. Therefore, the contribution margin per unit is Rs. 10 - Rs. 2 = Rs. 8.

2. Calculate the Break-even Point in units:
The break-even point in units can be calculated by dividing the total fixed costs by the contribution margin per unit.
Break-even Point (in units) = Total Fixed Costs / Contribution Margin per unit
Break-even Point (in units) = Rs. 1,00,000 / Rs. 8 = 12,500 units

3. Determine the correct option:
The correct answer is option 'C' which states that the break-even point is 12,500 units.

Explanation:
To break-even, Pintu needs to sell 12,500 units of ball pens. At this level, the total revenue generated from selling 12,500 units at a price of Rs. 10 per unit would be Rs. 1,25,000 (12,500 units x Rs. 10). This revenue would cover both the fixed costs of Rs. 1,00,000 and the variable costs of Rs. 2 per unit for the 12,500 units (12,500 units x Rs. 2). Thus, there would be no profit or loss at the break-even point.

It is important for businesses to determine their break-even point as it helps them understand the level of sales needed to cover their costs. It also provides insights into the profitability of the business and helps in making pricing and production decisions.
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Community Answer
Pintu runs a company that sells ball pens. They first determined the f...
To calculate the break-even point in units use the formula: Break-Even point (units) = Fixed Costs ÷ (Sales price per unit – Variable costs per unit) or in sales dollars using the formula: Break-Even point (sales dollars) = Fixed Costs ÷ Contribution Margin.
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Pintu runs a company that sells ball pens. They first determined the fixed costs, which included Property tax, salaries, etc, which sums up to 1,00,000. The variable cost for manufacturing a pen is 2 per unit. Hence, they sell the pen at a price of 10. If one has to determine the break-even point, that would come up to:a)5,000b)20,000c)12,500d)15,000Correct answer is option 'C'. Can you explain this answer? for Commerce 2025 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about Pintu runs a company that sells ball pens. They first determined the fixed costs, which included Property tax, salaries, etc, which sums up to 1,00,000. The variable cost for manufacturing a pen is 2 per unit. Hence, they sell the pen at a price of 10. If one has to determine the break-even point, that would come up to:a)5,000b)20,000c)12,500d)15,000Correct answer is option 'C'. Can you explain this answer? covers all topics & solutions for Commerce 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Pintu runs a company that sells ball pens. They first determined the fixed costs, which included Property tax, salaries, etc, which sums up to 1,00,000. The variable cost for manufacturing a pen is 2 per unit. Hence, they sell the pen at a price of 10. If one has to determine the break-even point, that would come up to:a)5,000b)20,000c)12,500d)15,000Correct answer is option 'C'. Can you explain this answer?.
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