Neco Model Questions Vol1 2020 Economics Question 20

Practice objective / multiple choice question 20 from the 2020 Neco Model Questions Vol1 Economics examination.

Neco Model Questions Vol1 2020 Economics Objective / Multiple Choice Medium Difficulty
Question 20 NECO_MODEL_QUESTIONS_VOL1 • 2020 • ECONOMICS • objective

A manufacturing firm has fixed costs of \(\text{₦}500{,}000\) per month. The variable cost per unit is \(\text{₦}150\). The current selling price of each unit is \(\text{₦}250\).\n\n(a) Determine the break‑even output (in units).\n(b) If the firm can reduce the variable cost by 10 % and raise the selling price by 5 %, what is the new break‑even output?\n(c) By what percentage does the break‑even output change compared with the original break‑even point?

Answer Options

A. Original break‑even = 5,000 units; new break‑even ≈ 4,200 units; break‑even falls by about 16.0 %
Correct Answer B. Original break‑even = 5,000 units; new break‑even ≈ 3,922 units; break‑even falls by about 21.6 %.
C. Original break‑even = 4,000 units; new break‑even ≈ 3,500 units; break‑even falls by about 12.5 %
D. Original break‑even = 5,500 units; new break‑even ≈ 3,922 units; break‑even falls by about 28.7 %
Correct Answer
B
Correct Option:
Original break‑even = 5,000 units; new break‑even ≈ 3,922 units; break‑even falls by about 21.6 %.

About This Question

This is Neco Model Questions Vol1 2020 Economics Question 20. It is one of the objective questions from the 2020 Neco Model Questions Vol1 Economics examination.

Difficulty level: Medium .

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