Question

32. If total fixed cost is Rs.8,000
1.5 points
and break even point is 4,000 units, the
contribution margin per unit will be

Answer 1

The contribution margin per unit will be 2 Rs.

Break Even points are where a companies costs equal their revenue. Or in other words when the company starts generating enough money to fully cover their cost of functioning.

The formula for calculating Break even is

Break Even = $\frac{Fixed Costs}{Contribution Margin}$

where, Contribution Margin = Revenue - Variable costs

Thus, using the formula

4,000 = $\frac{8000}{Contribution Margin}$

∴ Contribution Margin = 2 Rs