Variable cost is Rs.20 per unit and fixed cost is Rs.40,000. If break even point is reduced to 2000 units, find out the new selling price per unit.
Answers
Answer: THE NEW SELLING PRICE PER UNIT IS RS 40
Concept: We have the formula
Break Even Point = Fixed Costs ÷ (Sales Price per Unit – Variable Cost Per Unit)
Given:
Break Even Point = 2000 units
Variable Cost per unit = Rs 20
Fixed costs = Rs40,000
To find: Sales price per unit
Step by step explanation:
Break Even Analysis in economics, business, and accounting refers to an area where total costs and revenues are equal. Vacation point analysis is used to determine the number of units or dollars of revenue required to cover total costs (fixed and variable costs).
Break Even Point = 2000 units
Variable Cost per unit = Rs 20
Fixed costs = Rs40,000
We have the formula
Break Even Point = Fixed Costs ÷ (Sales Price per Unit – Variable Cost Per Unit)
Substituting Values in the formula
2000 = 40,000 ÷ (Sales Price per unit - 20)
(Sales Price per unit - 20) = 40,000/2000
(Sales Price per unit - 20) = 20
Sales Price per unit = 20 +20
Sales Price per unit = Rs40
Answer: THE NEW SELLING PRICE PER UNIT IS RS 40
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