Rob and John Ltd manufactures a standard model of vacuum cleaner. The selling price of each cleaner is £155. Variable costs of manufacture are £55.00. During its 20X1 financial year the company expects to incur fixed production costs of £80000 and fixed selling and administration overheads of £36000. How many vacuum cleaners will the company have to sell in order to break-even (to the nearest whole unit)?

Question

Quizplus · Accepted Answer

To calculate the break-even point in units, we use the formula: Break-even point in units = Fixed Costs / (Selling Price per Unit - Variable Cost per Unit). Here, Fixed Costs = £80000 (production) + £36000 (selling and administration) = £116000. Selling Price per Unit = £155, Variable Cost per Unit = £55. Thus, Break-even point = £116000 / (£155 - £55) = £116000 / £100 = 1160 units.

Rob and John Ltd Manufactures a Standard Model of Vacuum