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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?
Suggested Answer: B
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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.
20 comments · newest first
ER
Erin
2 months ago
I’m confused. Why not C? It sounds simpler.
IV
Ivan
2 months ago
I agree with Jenny. Fixed costs are high!
AN
Annamaria
2 months ago
I’m thinking B. 200,000 seems reasonable for breakeven.
JO
Jose
3 months ago
A is too low. It has to cover fixed costs too.
WI
Willie
3 months ago
Yeah, I feel like it’s a lot of math. I’m leaning towards A.
AH
Ahmad
3 months ago
This question is tricky! I think it’s about fixed costs.
TH
Theodora
3 months ago
Makes sense, but wow, that's a huge number!
HU
Hubert
3 months ago
Yep, fixed costs are high, so the volume needs to be too.
LO
Lonny
4 months ago
Wait, 200,000? That seems like a lot!
LE
Lemuel
4 months ago
Totally agree, it's all about covering those fixed costs.
CY
Cyndy
4 months ago
Gotta sell 200,000 bottles to break even!
AU
Audry
4 months ago
How did they come up with that number?
LO
Lorean
4 months ago
Totally agree, B is the right choice!
BE
Beata
4 months ago
Wait, 200k? That seems way too high.
MA
Marsha
6 months ago
Definitely B, that makes sense.
BE
Bernardo
6 months ago
Gotta sell 200,000 bottles to break even!
GE
Germaine
7 months ago
I feel like I saw a similar question in our practice exam. If I recall correctly, it was about finding how many units to sell to cover fixed costs. I think it was around 200,000 bottles, but I need to double-check.
ED
Edna
7 months ago
I'm not entirely sure how to set up the equation for this. Is it just fixed costs divided by the contribution margin?
LO
Loren
7 months ago
I remember something about calculating contribution margin. If the selling price is $1 and the variable cost is $0.50, the contribution margin is $0.50 per bottle.
MI
Mi
7 months ago
I think the breakeven point is where total revenue equals total costs, right? So we need to calculate that based on fixed and variable costs.