High School

We appreciate your visit to 3 Calculate i BEP in terms of sales and in unitsii No of units that must be sold to earn a profit of Rs 90000. This page offers clear insights and highlights the essential aspects of the topic. Our goal is to provide a helpful and engaging learning experience. Explore the content and find the answers you need!

3. Calculate:

i) BEP in terms of sales and in units
ii) No. of units that must be sold to earn a profit of Rs. 90000

| Particulars | Rs. |
| :------------------------------ | :---- |
| Fixed factory overhead cost | 60000 |
| Fixed selling overhead cost | 12000 |
| Variable manufacturing cost / unit | 12 |
| Variable selling cost per unit | 3 |
| Selling price per unit | 24 |

Answer :

Let's solve the problem step by step.

First, let's define the terms we are going to use:

  • Fixed Costs (FC): These are costs that do not change with the level of production or sales. Here, the fixed factory overhead cost is Rs. 60,000 and the fixed selling overhead cost is Rs. 12,000.
  • Variable Costs (VC): These are costs that change directly with the level of production. The variable manufacturing cost per unit is Rs. 12, and the variable selling cost per unit is Rs. 3. Therefore, the total variable cost per unit is Rs. 12 + Rs. 3 = Rs. 15.
  • Selling Price (SP) per unit: This is the price at which each unit is sold, which is Rs. 24.

i) Calculate the Break-Even Point (BEP)

The BEP in units is the number of units that need to be sold to cover all fixed and variable costs. The formula is:

[tex]\text{BEP (units)} = \frac{\text{Total Fixed Costs}}{\text{Selling Price per Unit} - \text{Variable Cost per Unit}}[/tex]

First, calculate the total fixed costs:

[tex]\text{Total Fixed Costs (TFC)} = 60,000 + 12,000 = 72,000[/tex]

Next, calculate the contribution margin per unit, which is the selling price per unit minus the variable cost per unit:

[tex]\text{Contribution Margin} = 24 - 15 = 9[/tex]

Now, compute the BEP in units:

[tex]\text{BEP (units)} = \frac{72,000}{9} = 8,000[/tex]

To find the BEP in terms of sales, multiply the BEP in units by the selling price per unit:

[tex]\text{BEP (sales)} = 8,000 \times 24 = 192,000 \text{ Rs.}[/tex]

ii) No. of units that must be sold to earn a profit of Rs. 90,000

To find the number of units needed to earn a specific profit, we use the formula:

[tex]\text{Required Units} = \frac{\text{Total Fixed Costs} + \text{Desired Profit}}{\text{Contribution Margin per Unit}}[/tex]

Substitute the given values:

[tex]\text{Required Units} = \frac{72,000 + 90,000}{9} = \frac{162,000}{9} = 18,000[/tex]

Therefore, the company needs to sell 18,000 units to earn a profit of Rs. 90,000.

In summary:

  1. The Break-Even Point is 8,000 units or sales worth Rs. 192,000.
  2. To earn a profit of Rs. 90,000, the company needs to sell 18,000 units.

Thanks for taking the time to read 3 Calculate i BEP in terms of sales and in unitsii No of units that must be sold to earn a profit of Rs 90000. We hope the insights shared have been valuable and enhanced your understanding of the topic. Don�t hesitate to browse our website for more informative and engaging content!

Rewritten by : Barada