ITPEC FE Morning April 2021 Question 79
ITPEC FE Morning April 2021 — Question 79 of 80
The BEP formula in units is:
BEP = Fixed Cost / (Price per unit - Variable cost per unit)
Given: Fixed cost = 100,000, Variable cost = 2, BEP = 10,000.
Rearranging: Price - Variable cost = Fixed Cost / BEP
Price - 2 = 100,000 / 10,000 = 10
Price = 12
Why not others:
- (a) 4 — would give contribution margin of 2, meaning BEP = 100,000 / 2 = 50,000 units
- (b) 8 — would give contribution margin of 6, meaning BEP = 100,000 / 6 ≈ 16,667 units
- (d) 16 — would give contribution margin of 14, meaning BEP = 100,000 / 14 ≈ 7,143 units
Key rule: BEP (units) = Fixed Cost / (Price - Variable Cost) — rearrange to find any missing variable.
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