ECR June 2009 Question

emma2009

Hi,

I am struggling to find the answer to task 2.3 a,b+c.

Do you know where you get the 50p from?
Can someone try and explain the answer to me because im confused?

Thank you
Emma

SandyHood

Emma
Did you make an attempt of your own at the question?

There are several correct approches to finding

1. £500,000
2. £820,000
3. £375,000 and 75%

SandyHood

Did you find (a) the break even value by finding break even unit x price?

If so, you could get the right answer.

emma2009

Hi,

No i got £80p-30p = 50p 312,500/0.50p=£625,000

SandyHood

Just look at that sum:

Fixed costs of £312,500 divided by the contribution earned every time one unit is sold (£0.50)

If I had £312,500 and I divided it by £0.50 I could say there are 625,000 50 pences in £312,500

In other words I must sell 625,000 units if I am to collect enough 50 pences to pay the fixed costs.

So £312,500/£0.50 = 625,000 units
and this is not the same as £625,000

In this exam a large number of candidates then said:
If I must sell 625,000 units to breakeven then the breakeven sales revenue must be this number of units x the price per unit (£0.80)

625,000 x £0.80 = £500,000

and got it right