COST ACCOUNTING
BREAK EVEN POINT
|
Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
|
Select all answers that are benefits of break-even analysis
|
|
It shows what the ‘margin of safety’ is
|
|
|
It shows a business how much it needs to reduce costs by to make a profit
|
|
|
It shows the level of loss/profit at different levels of production
|
|
|
A bank can use it to assess whether they should provide the company with a loan
|
|
|
It shows how the break-even level of output will change if there is a change in price, total costs or variable costs
|
Explanation:
Detailed explanation-1: -Put simply, break-even analysis helps you to determine at what point your business – or a new product or service – will become profitable, while investors also use it to determine the point at which they’ll recoup their investment and start making money.
Detailed explanation-2: -Break-even analysis tells you how many units of a product must be sold to cover the fixed and variable costs of production. The break-even point is considered a measure of the margin of safety.
There is 1 question to complete.