A factory produces a single product and sells each unit for £20. Variable production cost is £12 per unit, of which 40 % is labour cost. Fixed costs amount to £15 000 per month.

(i) Calculate the break‑even output (in units) under the current cost structure.

(ii) If the labour component of the variable cost rises by 10 % while all other costs remain unchanged, what is the new break‑even output? Round your answer to the nearest whole unit.

Question

A factory produces a single product and sells each unit for £20. Variable production cost is £12 per unit, of which 40 % is labour cost. Fixed costs amount to £15 000 per month.

(i) Calculate the break‑even output (in units) under the current cost structure.

(ii) If the labour component of the variable cost rises by 10 % while all other costs remain unchanged, what is the new break‑even output? Round your answer to the nearest whole unit.

Accepted Answer

Original break‑even: 1 875 units; New break‑even after labour increase: 1 995 units

Gce Model Questions Vol1 2019 Geography Question 23

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