COST ACCOUNTING
BREAK EVEN POINT
Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]


The fixed cost line is a horizontal straight line


The total cost line starts at zero and slopes upwards


The variable cost line starts at fixed costs and slopes upwards


The revenue line starts at zero and slopes upwards

Detailed explanation1: The correct answer is a) Statements 1) and 3) are correct. The company starts by deciding the sales mix and computes the breakeven analysis afterwards. The contribution margin ratio is computed by deducting variable cost from sales then dividing the difference by sales.
Detailed explanation2: Total profit at the breakeven point is zero.
Detailed explanation3: Answer and Explanation: A) the point where total profit equals total fixed expenses. This is incorrect because, at the breakeven point, the total contribution margin and the total fixed costs are equal.
Detailed explanation4: A breakeven chart is a chart that shows the sales volume level at which total costs equal sales. Losses will be incurred below this point, and profits will be earned above this point. The chart plots revenue, fixed costs, and variable costs on the vertical axis, and volume on the horizontal axis.