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 for a firm is 800 units and it is currently making 950 units. What is its margin of safety?
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150 units
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250 units
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300 units
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1750 units
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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: -Answer: The answer is 5, 000 units.
Detailed explanation-3: -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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