What is the breakeven quantity of weekly production for this particular situation fixed cost rs 1.500 per week variable cost rs3 per unit revenue rs 6 per unit
Answers
... The Break-Even for this situation is 0.5 unit per week ...
We can define Break-Even as a situation of
- No-profit
- No-loss
It is a point where Total Revenue of an organization becomes equal to Total Cost.
Let
Number of Units = x
Total Cost = Fixed Cost + Variable Cost
TC = 1.5 + 3 x
Revenue = 6 x
At Break-Even
Profit = 0
Revenue - TC = 0
6 x - ( 1.5 + 3 x ) = 0
6 x - 1.5 - 3 x = 0
3 x = 1.5
x = 1.5 /3
x = 0.5
The Break-Even for this situation is 0.5 unit per week.
The break even quantity of the production of this particular situation is 500 units of the product.
This is the number of units that the company must produce to meet the requirements of covering the fixed and variable cost.
At this point there is not profit or loss and hence it helps the company to understand how much of its product it should sell to start earning profits.