COST ACCOUNTING
BREAK EVEN POINT
|
Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
|
|
|
If we sell 55 units we aren’t making a profit
|
|
|
If we sell 54 units we begin to make a profit
|
|
|
If we sell 55 units we begin to make a profit
|
|
|
If we sell 54 units we are not yet at break-even point
|
Detailed explanation-1: -The breakeven number of units, as the name suggests, is the number of units of goods or services that a company needs to sell in order to break even, or in other words, to suffer no financial losses but also make no profit.
Detailed explanation-2: -Use the following calculations to find where your profits start. To calculate your break-even (dollar value) before net profit: Break-even ($) = overhead expenses ÷ (1 − (COGS ÷ total sales))
Detailed explanation-3: -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-4: -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.