Fixed costs £60,000; C/S ratio 0.25. Breakeven revenue equals?

• A. 120,000
• B. 60,000
• C. 240,000
• D. 2,400,000

Answer: (C)

This question tests using the contribution margin (C/S) ratio to find break-even revenue. The C/S ratio of 0.25 means that for every £1 of sales, £0.25 becomes contribution to fixed costs and profit. At break-even, contribution covers fixed costs exactly.

Let break-even revenue be S. Then 0.25 × S = £60,000. Solving gives S = 60,000 / 0.25 = £240,000. So the break-even revenue is £240,000.

For context, a revenue of £120,000 would yield £30,000 contribution (not enough to cover fixed costs), £60,000 would yield £15,000, and £2,400,000 would yield £600,000, producing a substantial profit.