COST ACCOUNTING
BREAK EVEN POINT
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Frederick is revising his formulae for a test on break-even. He has mixed up his revision notes. What is the formulas for Break-even
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Total revenue-total cost
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Fixed cost + variable cost
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Actual output-break-even point
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Total revenue = total cost
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Explanation:
Detailed explanation-1: -To calculate the break-even point in units use the formula: Break-Even point (units) = Fixed Costs ÷ (Sales price per unit – Variable costs per unit) or in sales dollars using the formula: Break-Even point (sales dollars) = Fixed Costs ÷ Contribution Margin.
Detailed explanation-2: -Break-even point in units = Fixed costs ÷ Contribution margin per unit. Your break-even point in units will tell you exactly how many units you need to sell to turn a profit. If you’re able to sell more units beyond this point, you’ll be making a profit.
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