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BUSINESS PLANNING: A startup calculates its break-even point. How many units must be sold monthly to break even? (1) Monthly fixed costs are $125,000, selling price is $250/unit, and variable costs are $150/unit (2) Contribution margin ratio is 40% and monthly fixed costs are $125,000

GMAT · 2021 · Data Insights
Question:
BUSINESS PLANNING: A startup calculates its break-even point. How many units must be sold monthly to break even? (1) Monthly fixed costs are $125,000, selling price is $250/unit, and variable costs are $150/unit (2) Contribution margin ratio is 40% and monthly fixed costs are $125,000

Options

(A) Statement (1) ALONE is sufficient, but statement (2) alone is not sufficient
(B) Statement (2) ALONE is sufficient, but statement (1) alone is not sufficient
(C) BOTH statements TOGETHER are sufficient, but NEITHER statement ALONE is sufficient
(D) EACH statement ALONE is sufficient
(E) Statements (1) and (2) TOGETHER are NOT sufficient
Answer: (A) Statement (1) ALONE is sufficient, but statement (2) alone is not sufficient

Explanation:
Statement (1): Contribution margin = $250 - $150 = $100. Break-even = $125,000/$100 = 1,250 units. Sufficient. Statement (2): Contribution margin ratio = 40% but without selling price, cannot determine unit break-even. Insufficient.

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