CIPS Exam L3M3 Topic 1 Question 26 Discussion

Actual exam question for CIPS's L3M3 exam

Question #: 26
Topic #: 1

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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Carey

6 days 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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Gerry

7 days 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

9 days 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

14 days 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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Frederica

18 days ago

I think the answer is C) 20,000.

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Mozell

23 days 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.

upvoted 0 times