# ECONOMICS

## COST ACCOUNTING

### BREAK EVEN POINT

 Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
A bakery has weekly fixed costs of \$600. The variable costs during one week of operation were \$1800 and the output achieved was 6000 loaves. The average cost of each loaf was
 A \$0.10 B \$0.30 C \$0.40 D \$4.00
Explanation:

Detailed explanation-1: -The bakery’s fixed costs consist of rent, bakery equipment, taxes, insurance, and utilities. The bakery’s variable costs for making one loaf of bread are \$1.80. These costs include bakery ingredients, marketing, and overhead. The bakery has a list price of \$5 for each loaf of bread it sells.

Detailed explanation-2: -Let’s say you own a small bakery. Your monthly expenses include rent (\$500), utilities (\$200), flour (\$100), sugar (\$50), eggs (\$20), and labor (\$500). In this scenario, your rent, utilities, flour, sugar, and eggs would be considered variable costs because they fluctuate with production volume.

Detailed explanation-3: -Examples of Variable Costs Generally, a product’s direct materials are a variable cost. For example, if a bakery uses one pound of flour for every loaf of bread it produces, the flour is a variable cost. If the flour costs \$0.40 per pound and no bread is produced, the total cost of flour will be \$0.

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