Break-even computation – small scale unit A small-scale unit has fixed cost Rs. 5,000 per month. Variable cost is Rs. 20 per piece and selling price is Rs. 30 per piece. What is the monthly break-even production (in pieces)?

Introduction / Context:
Break-even analysis helps determine the output where total revenue equals total cost, resulting in zero profit and zero loss. It is widely used for pricing and production planning in small enterprises.

Given Data / Assumptions:

• Fixed cost per month = Rs. 5,000.
• Selling price per unit = Rs. 30 per piece.
• Variable cost per unit = Rs. 20 per piece.
• Linear cost and price behavior within the relevant range.

Concept / Approach:
Break-even units (Q_BE) are computed from the contribution per unit. Contribution per unit = Price − Variable cost. Break-even occurs when Fixed cost = Contribution per unit * Q_BE, so Q_BE = Fixed cost / Contribution per unit.

Step-by-Step Solution:
Compute contribution per unit: 30 − 20 = 10 Rs/piece.Set equation: 5,000 = 10 * Q_BE.Solve for Q_BE: Q_BE = 5,000 / 10 = 500 pieces per month.

Verification / Alternative check:
Check totals at 500 pieces: Total revenue = 500 * 30 = Rs. 15,000; Total variable cost = 500 * 20 = Rs. 10,000; Add fixed cost 5,000 → Total cost = Rs. 15,000. Revenue equals cost, confirming break-even.

Why Other Options Are Wrong:
300 and 460 understate output; revenue would be less than total cost. 1000 overstates output; revenue would exceed cost, yielding profit.

Common Pitfalls:
Forgetting to use contribution (price − variable cost) instead of price alone; ignoring fixed cost changes at different capacity levels.

Final Answer:
500