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Paper 2 · break-even analysis

An enterprise has total fixed costs of 20000.Eachunitsellsfor20 000. Each unit sells for 3 and has a variable cost of $1. What is the break-even point in units?

A6 667 units
B10 000 units
C20 000 units
D60 000 units
Explanation: Break-even output is fixed costs divided by the contribution per unit. Contribution per unit is selling price less variable cost, that is 3−3 - 1 = 2,sobreak−evenis2, so break-even is 20 000 / $2 = 10 000 units. Dividing by the selling price gives 6 667 and dividing by the variable cost gives 20 000, both of which ignore contribution.

Derived from ZIMSEC Business Enterprise Skills Paper 2, Nov 2023, Q1

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