Discuss CIPS L3M3 Exam Topic 4 Question 45

The variable cost of a bottle of water is 25 cents. Selling price is $1, and fixed costs are one hundred thousand dollars. How many bottles of water must be sold to reach breakeven point?

A4 million

B133,333

C400,000

D13,333

Suggested Answer: B

The calculation which needs to be done is one hundred thousand (dollars) divided by the contribu-tion per bottle. The contribution per bottle is one dollar minus the variable cost - 25 cents. Thus the contribution is 75 cents. One hundred thousand divided by $0.75 = 133,333. Note the answer is in units - in response to the QUESTION NO : of how many bottles / units must be sold to break even.

For people who feel they have difficulty with calculations, just look at the possible answers. If the contribution is a bit less than a dollar, and the fixed costs are 100,000, we would expect the answer to be a number a little over 100,000 - one of the answers fits the bill, and this is the correct answer. So the QUESTION NO : may look complicated or difficult, but if you stay calm and think it through, it's not that difficult.

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26 comments · newest first

Grover 2 months ago

I believe B) is correct. Selling price minus variable cost gives the contribution per bottle.

Monte 2 months ago

I’m leaning towards C) 400,000. It seems like a safer estimate with the variable costs.

Tina 2 months ago

Yeah, I feel like it's B) 133,333. You need to cover the fixed costs with the profit from each bottle.

Delsie 3 months ago

This question is tricky! I think it's about calculating fixed costs and contribution margin.

Jackie 3 months ago

I’m not sure, but I think it’s A) 4 million. Seems too high though!

Simona 3 months ago

I agree with Sarah. Fixed costs divided by profit per bottle leads to that answer.

Merlyn 3 months ago

Yeah, I feel like it’s a lot of math. I’m leaning towards B) 133,333.

Pansy 3 months ago

This question is tricky! I think it’s about calculating fixed costs.

Lindy 4 months ago

I agree with B too! Selling price minus variable cost gives us profit per bottle.

Suzan 4 months ago

I feel like I might have miscalculated. The fixed costs are high!

Lindsey 4 months ago

Definitely! I believe the answer is B) 133,333 bottles.

Shantay 4 months ago

This question is tricky! I think it's about calculating fixed costs vs. profit.

Delila 4 months ago

I thought it would be lower than that, wow!

Niesha 4 months ago

Totally agree with B, makes sense!

Hyun 6 months ago

Wait, are you sure about that? Seems high!

Yuette 6 months ago

Definitely B) 133,333 bottles!

Lina 6 months ago

Breakeven point is where total costs equal total revenue!

Dyan 6 months ago

Really? 133,333 seems way too low for fixed costs that high.

Felicidad 7 months ago

Gotta agree with B, simple math!

Ria 7 months ago

Wait, how did you get that number? Sounds off.

Carissa 7 months ago

No way, it's C) 400,000 for sure.

Alison 7 months ago

It's definitely B) 133,333 bottles!

Blair 7 months ago

I’m not confident about this one. I feel like I might have seen a question with a similar setup, but I can't recall the exact numbers.

Aleisha 7 months ago

If the variable cost is 25 cents and the selling price is $1, the contribution margin should be 75 cents. I think that means we need to sell around 133,333 bottles to break even.

Ashley 8 months ago

I remember a similar question where we had to find the breakeven point using variable and fixed costs. I think it was something like 133,000 bottles, but I could be mixing it up.

Apolonia 8 months ago

I think the breakeven point is calculated by dividing fixed costs by the contribution margin, but I'm not completely sure how to find that margin here.

CIPS L3M3 Exam - Topic 4 Question 45 Discussion