ITPEC FE Morning April 2020 Question 78
ITPEC FE Morning April 2020 — Question 78 of 80
Break-Even Point (BEP) Calculation — find fixed costs given BEP units, price, and variable cost.
The BEP formula is:
BEP (units) = Fixed Costs / (Price per unit - Variable cost per unit)
Rearranging to find Fixed Costs:
Fixed Costs = BEP × (Price - Variable Cost)
Company A:x = 500 × (120 - 40) = 500 × 80 = 40,000
Company B:y = 600 × (140 - 60) = 600 × 80 = 48,000
Answer: (d) x = 40,000, y = 48,000
Why not others:
- (a) Both values are incorrect (20,000 and 36,000)
- (b) x = 20,000 is wrong — uses an incorrect contribution margin for Company A
- (c) y = 36,000 is wrong — uses an incorrect contribution margin for Company B
Key rule: BEP × Contribution Margin = Fixed Costs. The contribution margin is simply Price minus Variable Cost per unit.
AI-generated — may contain errors
The original exam layout is preserved in the image so diagrams, formulas, tables, and code remain accurate.
This question comes from an official ITPEC past paper. ITPEC Practice is an independent study tool and is not affiliated with ITPEC. See the official FE past-paper collection or Report an issue.