COST ACCOUNTING
BREAK EVEN POINT
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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the break-even level of output rises and profit increases
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the break-even level of output falls and profit increases
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the break-even level of output remains the same and profit increases
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The break-even level of output falls and profit falls
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Detailed explanation-1: -The break-even point does not change when sales change. It remains the point at which revenue covers variable and fixed costs without any profit or loss.
Detailed explanation-2: -Factors that Increase a Company’s Break-even Point When there is an increase in customer sales, it means that there is higher demand. A company then needs to produce more of its products to meet this new demand which, in turn, raises the BEP in order to cover the extra expenses.
Detailed explanation-3: -The break-even point is the point at which total cost and total revenue are equal, meaning there is no loss or gain for your small business. In other words, you’ve reached the level of production at which the costs of production equals the revenues for a product.
Detailed explanation-4: -The break-even point will increase by any of the following: An increase in the amount of the company’s fixed costs/expenses. An increase in the per unit variable costs/expenses. A decrease in the company’s selling prices.