CBCB011
Break Even Point Analysis Questions
Question 1
A company produces a product with a fixed cost of R2 000, a selling price of R25, and a
variable cost of R18 per unit.
(a) Calculate the break-even point in units.
(b) How many units does the company need to sell to earn a profit of R1 000?
Question 2
Fixed Expenses = R90 000
Selling Price per unit = R20
Variable Cost per unit:
Direct Material = R5
Direct Labour = R2
Direct Overheads = 100% of Direct Labour
From the following data, you are required to calculate:
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(a) P/V ratio
(b) Break-even sales with the help of P/V ratio.
(c) Sales required to earn a profit of R450 000
Question 3
Deeps Limited Company sells only one product with a selling price of R200 and a
variable cost of R80 per unit. The company’s monthly fixed expense is R60 000.
Required:
(a) Determine the breakeven point in units sold and the breakeven point in sales.
(b) Determine the breakeven point in units sold and the breakeven point in sales if
the company wants to achieve a profit before tax of R30 000.
(c) Determine margin of safety if current sales are R175 000.
Question 4
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Draw the table below and insert the correct figures.
Sales Revenue: Each cake is sold for R50
Rent: R750
Each cake costs R10 to make.
Number of Cakes
sold
Sales Revenue
Fixed Costs
Variable Costs
Total Costs
Net Profit
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0
50
100
CBCB011
Question 5
A firm has the following income statement for a month:
Sales: 3 000 units at R80/unit
R240 000
Less: Cost of Goods Sold.
Variable Production Cost
R180 000
Fixed Production Cost
R19 800
Gross Margin
R40 200
Selling and Administrative Expenses
Variable Selling Cost
R21 000
Fixed Selling Expenses
R7 500
Net Profit Before Taxes
R11 700
Required:
(a) Find the firm’s breakeven output.
(b) If it wishes to have a monthly net profit before taxes of R18 000 and its cost
structure remains as above, what quantity of output will it need to sell?
(c) If its variable production costs increase by R4 per unit, what will be its breakeven
output?
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(d) After the increase in costs in (c), what output will it need to sell if it wishes to
have the R18 000 monthly before tax profit stated earlier?
(e) Given the variable production cost increase but no change in fixed costs, what
will be the firm’s monthly profit if it sells 4,000 units of output per month?
Question 6
During the summer weeks, Polokwane Ice Cream Private Limited has average sales
of 400 ice creams a week. Each ice cream sells for R100 and has variable costs of R25.
Fixed costs are R800.
Required:
(a) Calculate the total costs for the business in the summer weeks.
(b) Calculate the company’s weekly profit in the summer.
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(c) Calculate the company’s break even units.
(d) If the company wants to earn an operating profit of R42 000, what is the number
of units that it must sell?
(e) Calculate the company’s break even sales value.
(f) Calculate the company’s margin of safety.
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Question 7
ToyPro Limited is a producer and retailer of toys for children. They are an
established business and have been trading for 30 years and have a large factory in
Cape Town. They have 24 retail outlets around South Africa. You are given the
following information:
Cost, revenue and profits for ToyPro Ltd for the year 2022
R(000)
Sales revenue
6 000
Fixed costs
2 000
Variable costs
2 250
Profit
1 750
The company produced (at same cost per toy) and sold (for the same price per toy) 750
000 toys in 2022.
Required:
(a) How many toys does ToyPro have to produce and sell to break even?
(b) Determine ToyPro’s break even value.
(c) Calculate the margin of safety.
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(d) Sketch a fully labeled break even graph the given information and applicable
calculations you have done.
(e) Make use of your break even graph to indicate the number of toys that ToyPro
should produce and sell if it wishes to have a profit R20 000?
(f) Make use of you break even graph to indicate ToyPro’s profit if it produces and
sells 25 000 toys for the year.
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Question 8
A bakery has non-variable costs of R45 000. A loaf of bread sells for R7.50 and
has a variable cost of R5.50.
(a) What will the profit be if 30 000 loaves of bread are sold?
(b) What is the break-even sales value?
(c) What is the break-even point in value?
(d) What is the margin of safety?
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