A company produces a commodity with ₹24000 fixed cost. The variable cost is estimated to be 25% of the total revenue recovered on selling the product at a rate of ₹8 per unit. Find the Breakeven point.
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → 4000 units
Let $x$ units of the product be produced and sold. As the selling price of one unit is ₹8, so the total revenue on selling x units = $₹8x$.
Since the variable cost is 25% of total revenue recovered,
so the variable cost = 25% of $₹8x =₹(\frac{25}{100}×8x)=₹2x$.
Fixed cost of the company is ₹24000.
∴ Cost function (in ₹) = $C(x) = 2x + 24000$.
Revenue function (in ₹) = $R(x) = 8x$.
At breakeven points, $R(x) = C(x)$
$⇒ 8x= 2x + 24000⇒ 6x = 24000⇒x=4000$
Hence, breakeven point is $x = 4000$.