ICANBusiness, Management and FinanceMarketing Fundamentals2020

A retail company in Abuja sells a product for ₦15,000 per unit. Variable cost per unit is ₦9,000 and fixed marketing costs total ₦3,600,000 per annum. What is the marketing break-even quantity (in units) the company must sell to cover its fixed marketing costs?

A400 units
B600 unitsCORRECT
C240 units
D720 units
AI
Toaster Teacher
Why the answer is B, and why the others tempt you.
Contribution per unit = ₦15,000 − ₦9,000 = ₦6,000. Break-even quantity = Fixed costs ÷ Contribution per unit = ₦3,600,000 ÷ ₦6,000 = 600 units. This is the minimum number of units that must be sold for marketing revenues to cover the fixed marketing costs.
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