CIPS L3M3 Exam - Topic 1 Question 26 Discussion

Actual exam question for CIPS's L3M3 exam

Question #: 26
Topic #: 1

[All L3M3 Questions]

A bottle of sparkling water sells for $1. The variable cost is 50 cents. Fixed costs for the business are $100,000 (one hundred thousand dollars). How many bottles of water must be sold for the business to reach breakeven point?

A50,000

B200,000

C20,000

D2 million

Show Suggested Answer

Suggested Answer: B

The 'contribution' (selling price minus variable cost) for each bottle is 50 cents. Divide the fixed costs by the contribution (100,000 / 0.5) = 200,000

If your textbook or tutor has not covered this type of calculation, don't worry; it is a difficult ques-tion and is unlikely to be a significant issue in the CIPS examination.

by Kris at Nov 14, 2024, 06:58 AM

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Jesusa

3 months ago

Just did the math, and yep, 200,000 is correct!

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Stevie

3 months ago

Totally agree, 200k makes sense with those costs.

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Lorrie

3 months ago

Wait, really? That seems like a lot!

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Ivette

4 months ago

Actually, it's 200,000 bottles.

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Blondell

4 months ago

Gotta sell 100,000 bottles to break even!

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Hannah

4 months ago

I think the answer is definitely not 2 million, but I’m not sure if it’s 50,000 or 20,000. I need to double-check my calculations!

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Gilma

4 months ago

I'm a bit unsure about the numbers, but I feel like we might need to sell around 100,000 bottles to cover the fixed costs.

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Launa

4 months ago

I remember a similar question where we had to find the breakeven point, but I can't recall the exact formula. Is it fixed costs divided by the contribution margin?

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Susana

5 months ago

I think we need to calculate the contribution margin first, right? It's the selling price minus the variable cost.

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Lajuana

5 months ago

This seems pretty simple. I just need to set up an equation and solve for the number of units. The tricky part is remembering the right formula, but I think I can work through this.

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Theresia

5 months ago

Okay, I think I've got this. The breakeven point is where total revenue equals total cost. So I need to find the number of units where the revenue ($1 per unit) equals the variable cost ($0.50 per unit) plus the fixed cost ($100,000).

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Brittni

5 months ago

Hmm, I'm a bit confused. How do I calculate the breakeven point from the information given? I need to review my notes on this type of problem.

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Rosio

5 months ago

This looks like a straightforward breakeven calculation. I'll need to find the number of units where total revenue equals total cost.

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Ryan

1 year ago

Hmm, let me break out my calculator and do the math... Yep, B) 200,000 is the right answer. This is a piece of cake compared to the real world, where the breakeven point is just 'when the boss stops yelling at you'.

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Chanel

1 year ago

I bet the guy who wrote this question was really thirsty when he came up with it. The correct answer is clearly B) 200,000.

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Hassie

1 year ago

No, I'm pretty sure it's B) 200,000.

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Giuseppe

1 year ago

I think the answer is A) 50,000.

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Carey

1 year ago

D) 2 million? That's gotta be a joke. Who would need to sell that many bottles of water to break even? I'm going with A) 50,000.

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Breana

1 year ago

A) 50,000

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Mayra

1 year ago

B) 200,000

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Carrol

1 year ago

C) 20,000

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Adelina

1 year ago

A) 50,000

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Gerry

1 year ago

I'm not sure about the math, but I think C) 20,000 makes sense. It seems like the most reasonable option.

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Keshia

1 year ago

I agree with Frederica. The fixed costs are $100,000, so if the variable cost is 50 cents per bottle, we need to sell 20,000 bottles to break even.

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Latonia

1 year ago

No way, the answer is C) 20,000. That's easy, just divide the fixed costs by the contribution margin per bottle.

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Noel

1 year ago

A: Exactly, it's a simple calculation to determine the breakeven point.

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Dorcas

1 year ago

B: So, that means the business needs to sell 20,000 bottles of water to reach the breakeven point.

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Jose

1 year ago

A: The answer is C) 20,000. You're right, just divide the fixed costs by the contribution margin per bottle.

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Frederica

1 year ago

I think the answer is C) 20,000.

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Mozell

1 year ago

I think the correct answer is B) 200,000. The fixed costs are $100,000 and the variable cost per bottle is $0.50, so we need to sell enough bottles to cover the fixed costs.

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