---
title: "Break-even analysis for a startup"
subject: "Entrepreneurship Development"
chapter: 5
key: "semester_7/entrepreneurship_development:break-even-analysis-numerical"
source: https://www.bctengineer.com/q/semester_7/entrepreneurship_development/break-even-analysis-numerical
site: BCT Engineering
---

# Break-even analysis for a startup

Entrepreneurship Development · Chapter 5: Development of Business Plan and Execution

- Asked in: year not given, 6 marks
- Video: [Break-even Analysis | Breakeven Chart, Formula  (In 4 minutes)](https://www.youtube.com/watch?v=XZ0riJeipw4) — Educationleaves
- Answer checked by Claude Opus 5.5 (high effort) on 2026-10-14
- Page: https://www.bctengineer.com/q/semester_7/entrepreneurship_development/break-even-analysis-numerical
- Whole chapter: https://www.bctengineer.com/md/semester_7/entrepreneurship_development/chapter-5

## Question

A startup sells a product at Rs 250 per unit. Variable cost is Rs 150 per unit and fixed cost is Rs 6,00,000 per year. Find (a) the break-even quantity and break-even sales, (b) the profit if 9,000 units are sold, (c) the margin of safety at 9,000 units, and (d) the units to be sold to earn a profit of Rs 2,00,000.

## Short answer

Contribution per unit = Rs 100. Break-even = 6,000 units, Rs 15,00,000 sales. Profit at 9,000 units = Rs 3,00,000. Margin of safety = 33.3%. Units for Rs 2,00,000 profit = 8,000 units.

## Answer

#### Given
$P = 250$, $V = 150$, $F = 6{,}00{,}000$.

Contribution per unit:

$$
C = P - V = 250 - 150 = \text{Rs } 100
$$

Contribution margin ratio:

$$
\frac{100}{250} = 0.40
$$

#### (a) Break-even
$$
Q_{BE} = \frac{F}{P-V} = \frac{6{,}00{,}000}{100} = 6{,}000\ \text{units}
$$

$$
\text{Break-even sales} = 6{,}000 \times 250 = \text{Rs } 15{,}00{,}000
$$

(Check: $6{,}00{,}000 / 0.40 = 15{,}00{,}000$.)

#### (b) Profit at 9,000 units
$$
\text{Profit} = 9{,}000 \times 100 - 6{,}00{,}000 = \text{Rs } 3{,}00{,}000
$$

#### (c) Margin of safety
$$
\text{MoS} = \frac{9{,}000 - 6{,}000}{9{,}000} = 0.333 = 33.3\%
$$

Sales can fall by one-third before the firm starts losing money.

#### (d) Units for a profit of Rs 2,00,000
$$
Q = \frac{F + \text{Profit}}{P-V} = \frac{6{,}00{,}000 + 2{,}00{,}000}{100} = 8{,}000\ \text{units}
$$

```text
 Rs
  |            Total revenue /
  |          /  Total cost /
  |        X <- break-even (6,000 units)
  |   Fixed cost ------------
  +--------------------------- units
```

**Answer:** (a) 6,000 units, Rs 15,00,000; (b) Rs 3,00,000; (c) 33.3%; (d) 8,000 units.

## Check yourself

The answer's key points as multiple-choice questions, with the correct option and why.

1. Contribution per unit is:
   A. Rs 100
   B. Rs 250
   C. Rs 150
   D. Rs 400
   Answer: A. 250 - 150 = 100. (Key point: Contribution)

2. Break-even quantity and sales are:
   A. 4,000 units and Rs 10,00,000
   B. 6,000 units and Rs 15,00,000
   C. 6,000 units and Rs 9,00,000
   D. 2,400 units and Rs 6,00,000
   Answer: B. F/(P-V) = 6,00,000/100 = 6,000; x 250 = 15,00,000. (Key point: Break-even)

3. At 9,000 units, profit and margin of safety are:
   A. Rs 9,00,000 and 66.7%
   B. Rs 3,00,000 and 50%
   C. Rs 3,00,000 and 33.3%
   D. Rs 2,25,000 and 33.3%
   Answer: C. 9,000 x 100 - 6,00,000 = 3,00,000; (9,000-6,000)/9,000 = 33.3%. (Key point: Profit and margin of safety)

4. Units for Rs 2,00,000 profit:
   A. 2,000
   B. 6,000
   C. 9,000
   D. 8,000
   Answer: D. (6,00,000 + 2,00,000)/100 = 8,000. (Key point: Target profit)

## Related in Entrepreneurship Development

- [Cost-plus pricing numerical](https://www.bctengineer.com/question.md?key=semester_7%2Fentrepreneurship_development%3Apricing-cost-plus-numerical) — Entrepreneurship Development, chapter 3
- [Customer lifetime value and CAC numerical](https://www.bctengineer.com/question.md?key=semester_7%2Fentrepreneurship_development%3Altv-cac-unit-economics) — Entrepreneurship Development, chapter 4
- [NPV and payback of a startup project](https://www.bctengineer.com/question.md?key=semester_7%2Fentrepreneurship_development%3Anpv-payback-startup-project) — Entrepreneurship Development, chapter 5
- [Revenue streams and cost structure](https://www.bctengineer.com/question.md?key=semester_7%2Fentrepreneurship_development%3Arevenue-streams-and-cost) — Entrepreneurship Development, chapter 4
- [Marketing strategies, pricing and credit policy](https://www.bctengineer.com/question.md?key=semester_7%2Fentrepreneurship_development%3Amarketing-strategy-price-credit) — Entrepreneurship Development, chapter 5
- [Product and service design process](https://www.bctengineer.com/question.md?key=semester_7%2Fentrepreneurship_development%3Aproduct-service-design-process) — Entrepreneurship Development, chapter 2

## Related in other subjects

- [Break-even units and output for desired profit](https://www.bctengineer.com/question.md?key=semester_6%2Fengineering_economics%3Abreakeven-units-profit-50000) — Engineering Economics, chapter 1
- [Break-even cost comparison of three sites](https://www.bctengineer.com/question.md?key=semester_6%2Findustrial_engineering_and_management%3Abreak-even-analysis-plant-location) — Industrial Engineering and Management, chapter 2
- [Break-even hours for two pumps](https://www.bctengineer.com/question.md?key=semester_6%2Fengineering_economics%3Abreakeven-hours-khasa-sarvo-pump) — Engineering Economics, chapter 1
- [EPS and book value; ABC project Rs 6,00,000](https://www.bctengineer.com/question.md?key=semester_7%2Fproject_engineering%3Aeps-bv-abc-project-600000-b79) — Project Engineering, chapter 6