A factory manufactures a cell phone with a variable cost of Rs 15 per unit and sells it at a price of Rs 24 per unit. If the breakeven quantity for the factory is 2400 units, what is the total fixed cost of the factory?

Introduction / Context:
This problem applies basic cost volume profit analysis from managerial economics or business accounting. The breakeven point is the level of output at which total revenue equals total cost and profit is zero. Knowing the selling price, variable cost per unit, and breakeven quantity allows you to compute the fixed cost of production. This type of calculation is very useful for planning, pricing, and financial decision making in firms.

Given Data / Assumptions:

• Selling price (P) = Rs 24 per unit.
• Variable cost per unit (VC) = Rs 15 per unit.
• Breakeven quantity (Q_BE) = 2400 units.
• Fixed cost (FC) is constant and does not vary with output.
• We assume all units produced at breakeven are sold and there are no inventories.

Concept / Approach:
At the breakeven point, total revenue equals total cost. Total revenue is price multiplied by quantity, and total cost is fixed cost plus variable cost per unit multiplied by quantity. The contribution per unit is defined as price minus variable cost. At breakeven, total contribution equals total fixed cost. Thus, the fixed cost can be found either by equating total revenue and total cost or by using the contribution method. The simplest formula here is fixed cost = contribution per unit * breakeven quantity.

Step-by-Step Solution:
Step 1: Compute the contribution per unit, which is selling price minus variable cost: contribution per unit = 24 - 15 = Rs 9.Step 2: Recall the breakeven condition: at the breakeven point, total contribution equals fixed cost.Step 3: Compute total contribution at the breakeven output: total contribution = contribution per unit * Q_BE = 9 * 2400.Step 4: Multiply 9 by 2400 carefully: 9 * 24 = 216, then add two zeros to get 21600. So total contribution is Rs 21600.Step 5: Since total contribution at breakeven equals fixed cost, fixed cost = Rs 21600.Step 6: Match this value with the options and select Rs 21600.

Verification / Alternative check:
We can verify the answer by explicitly computing total revenue and total cost at the breakeven quantity. Total revenue (TR) at 2400 units is P * Q = 24 * 2400 = Rs 57600. Total variable cost (TVC) is VC * Q = 15 * 2400 = Rs 36000. If fixed cost is 21600, then total cost (TC) = TVC + FC = 36000 + 21600 = Rs 57600. Since TR equals TC at this quantity, profit is zero, which confirms that 2400 units is indeed the breakeven point with fixed cost of Rs 21600. This internal consistency check supports the calculation.

Why Other Options Are Wrong:
Rs. 36000: This equals total variable cost at the breakeven quantity, not the fixed cost, so it does not satisfy the breakeven condition.

Rs. 57600: This is total revenue at 2400 units and would imply zero variable cost if taken as fixed cost, which is not consistent with the given variable cost.

Rs. 14400: This value leads to total cost lower than total revenue at 2400 units, implying a profit, so it cannot be the fixed cost at breakeven.

Common Pitfalls:
Students sometimes confuse variable cost with fixed cost and mistakenly use variable cost in place of contribution per unit. Another common error is miscomputing the multiplication by breakeven quantity, especially when large numbers and zeros are involved. It is also common to mix up total revenue and fixed cost because both are large numbers. Carefully writing out the formula and verifying with a second method, as shown above, is a reliable way to avoid these mistakes in exams and practical applications.

Final Answer:
The fixed cost of the factory is Rs 21600.