COST ACCOUNTING
BREAK EVEN POINT
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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The fixed cost line is a horizontal straight line
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The total cost line starts at zero and slopes upwards
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The variable cost line starts at fixed costs and slopes upwards
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The revenue line starts at zero and slopes upwards
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Detailed explanation-1: -The correct answer is a) Statements 1) and 3) are correct. The company starts by deciding the sales mix and computes the break-even analysis afterwards. The contribution margin ratio is computed by deducting variable cost from sales then dividing the difference by sales.
Detailed explanation-2: -Total profit at the break-even point is zero.
Detailed explanation-3: -Answer and Explanation: A) the point where total profit equals total fixed expenses. This is incorrect because, at the break-even point, the total contribution margin and the total fixed costs are equal.
Detailed explanation-4: -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.