COST ACCOUNTING
BREAK EVEN POINT
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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The amount a business must pay in costs is greater than the amount it must sell to earn revenue.
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It is where the profit made is greater than the loss as revenue is greater than total costs.
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The amount a business must sell to earn enough revenue to just cover its costs so it does not make a profit or a loss.
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It is where the profit made is less than loss as revenue is less than total costs.
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Detailed explanation-1: -A break-even price is the amount of money, or change in value, for which an asset must be sold to cover the costs of acquiring and owning it. It can also refer to the amount of money for which a product or service must be sold to cover the costs of manufacturing or providing it.
Detailed explanation-2: -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-3: -The break-even point is the point where a company’s revenues equals its costs. The calculation for the break-even point can be done one of two ways; one is to determine the amount of units that need to be sold, or the second is the amount of sales, in dollars, that need to happen.
Detailed explanation-4: -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-5: -Break-Even Point: It is the volume of production where total cost equal to total sale and an organisation neither earn profit nor suffer from loss. It is also known as No Profit – No Loss point.