Question

A company makes a product with a selling price of Rs.20 per unit and variable costs
of Rs. 12 per unit. The fixed costs for the period are Rs. 40,000/. How many pieces are to be sold to reach the break even point?

Answer 1

⇒ Here, price per unit (p)=Rs.6

⇒ Total revenue R(x)=p.x=6x where x is the number of unit sold.

⇒ Cost function C(x)=4500+

100

25

R(x)

⇒ Cost function C(x)=4500+

100

25

×6x

⇒ C(x)=4500+

2

3

x

⇒ Profit function P(x)=R(x)−C(x)

⇒ P(x)=6x−(4500+

2

3

x)

∴ P(x)=6x−

2

3

x−4500

⇒ At break even point P(x)=0

⇒ 6x−

2

3

x−4500=0

⇒

2

12x−3x

−4500=0

⇒ x=

9

9000

=1000

⇒ Hence, x=1000 is break even point.