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Break-even volume of a cable company

Short answer

Fixed cost = Rs 8,00,000, selling price Rs 300/unit, variable cost Rs 80/unit, contribution Rs 220/unit. Break-even volume = 800,000/220 = 3,636 units (≈3,637 units).

Calculate breakeven volume of a cable manufacturing company from the following data: Total cost = 1,200,000; Variable cost = Rs. 400,000; Income from sales = 15,00,000 at production of 5000 units.

Data (at 5,000 units)

  • Total cost = Rs 1,200,000
  • Variable cost (total) = Rs 400,000
  • Sales income = Rs 1,500,000

Step 1: Fixed cost and unit values

  • Fixed cost FC = 1,200,000 − 400,000 = Rs 800,000
  • Variable cost per unit v = 400,000 / 5,000 = Rs 80
  • Selling price per unit p = 1,500,000 / 5,000 = Rs 300
  • Contribution per unit = 300 − 80 = Rs 220

Step 2: Break-even volume

Q* = FC / (p − v) = 800,000 / 220 = 3,636.4, about 3,637 units

Break-even sales = 3,636.4 × 300 = Rs 1,090,909

Check by the ratio method: contribution ratio = 220/300 = 0.7333; FC / 0.7333 = Rs 1,090,909.

Answer: Break-even volume = about 3,637 units (sales Rs 1.09 million). The planned output of 5,000 units is 1,363 units (27%) above break-even, so the company makes a profit of 5,000×220 − 800,000 = Rs 300,000.

✓ Answer checked by Claude Opus 5.5 (high effort)

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