COST ACCOUNTING
BREAK EVEN POINT
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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average costs + fixed cost
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fixed costs-total variable costs
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variable costs + average costs
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fixed costs + total variable costs
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Detailed explanation-1: -This point analysis can be used to determine the number of units or dollars of revenue necessary to cover total costs – both fixed and variable. To calculate this number, you need to understand and calculate both your fixed costs and variable cost per unit.
Detailed explanation-2: -First, add up all of your production costs. Make sure to be clear about which costs are fixed and which ones are variable. Take your total cost of production and subtract your variable costs multiplied by the number of units you produced. This will give you your total fixed cost.
Detailed explanation-3: -Labor usage is denoted L and the per unit cost, or wage rate, is denoted w, so the variable cost is Lw. Consequently, total cost is fixed cost (FC) plus variable cost (VC), or TC = FC + VC = Kr+Lw.
Detailed explanation-4: -Total fixed cost (TFC) is that cost which does not change with a change in the level of output. Total variable cost (TVC) is that cost which changes as the level of output changes. Total cost (TC) is the sum of total fixed cost and total variable fixed cost.
Detailed explanation-5: -Total costs = fixed costs + (number of units of A * variable cost per unit of A) + (number of units of B * variable cost per unit of B)