COST ACCOUNTING
BREAK EVEN POINT
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Total sales less total variable costs
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Total sales less fixed costs
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Variable costs less fixed costs
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Total selling price less fixed costs.
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Detailed explanation-1: -Since you have the contribution margin ratio, you must identify the variable cost ratio and use that figure to determine the total sales. To do so, subtract the contribution margin ratio from 100 to determine the variable cost ratio, and then divide the variable cost amount by that percentage.
Detailed explanation-2: -The contribution margin is calculated by subtracting the total variable costs from the total sales revenue. The formula is: Contribution Margin = Total Sales Revenue – Total Variable Costs.
Detailed explanation-3: -Thus, the calculation of contribution per unit is: (Total revenues-Total variable costs) ÷ Total units = Contribution per unit. When only one product is being sold, the concept can also be used to estimate the number of units that must be sold so that a business as a whole can break even.