COST ACCOUNTING
COST VOLUME PROFIT ANALYSIS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Mathematical Equation method
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Regression method
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Graph method
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Contribution Margin approach
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Detailed explanation-1: -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-2: -Answer and Explanation: Using any mathematical equation will not be appropriate to derive break-even point.
Detailed explanation-3: -6-7 Three approaches to break-even analysis are (a) the graphical method, (b) the equation method, and (c) the contribution margin method. In the graphical method, total cost and total revenue data are plotted on a graph. The intersection of the total cost and the total revenue lines indicates the break-even point.
Detailed explanation-4: -The breakeven point (BEP) formula is determined by dividing the total fixed costs associated with production by the contribution per unit, i.e, Sale price per unit minus the variable costs per unit.