COST ACCOUNTING
BREAK EVEN POINT
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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total revenue is equal to profit
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total revenue is equal to total costs
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total revenue is equal to variables costs
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total revenue is equal to margin of safety
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Detailed explanation-1: -A firm’s break-even point occurs when at a point where total revenue equals total costs. Break-even analysis depends on the following variables: Selling Price per Unit:The amount of money charged to the customer for each unit of a product or service.
Detailed explanation-2: -The break-even point (BEP) in economics, business-and specifically cost accounting-is the point at which total cost and total revenue are equal, i.e. “even". There is no net loss or gain, and one has “broken even", though opportunity costs have been paid and capital has received the risk-adjusted, expected return.
Detailed explanation-3: -When the total revenue is equal to the total cost, the firm is not making any additional profit but is also not in loss. The earnings are equal to the expense hence it is called the break even point.
Detailed explanation-4: -Break-Even Units = Total Fixed Costs / (Price per Unit-Variable Cost per Unit)
Detailed explanation-5: -The break-even point is equal to the total fixed costs divided by the difference between the unit price and variable costs.