COST ACCOUNTING
COST VOLUME PROFIT ANALYSIS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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total cost divided by variable cost per unit
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contribution margin per unit divided by revenue per unit
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fixed cost divided by contribution margin per unit
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the sum of fixed and variable costs divided by contribution margin per unit
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Detailed explanation-1: -When determining a break-even point based on sales dollars: Divide the fixed costs by the contribution margin. The contribution margin is determined by subtracting the variable costs from the price of a product. This amount is then used to cover the fixed costs.
Detailed explanation-2: -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-3: -Fixed costs divided by contribution margin per unit equals the breakeven point in unit sales. Fixed costs divided by the contribution margin ratio equals the breakeven point in sales dollars. The breakeven point is the point where the sales revenues are equal to the total variable costs plus the total fixed costs.
Detailed explanation-4: -A company’s breakeven point is the point at which its sales exactly cover its expenses. Fixed Costs ÷ (Price-Variable Costs) = Breakeven Point in Units. Pricing a product, the costs incurred in a business, and sales volume are interrelated.
Detailed explanation-5: -Alternatively, the calculation for a break-even point in sales dollars happens by dividing the total fixed costs by the contribution margin ratio. The contribution margin ratio is the contribution margin per unit divided by the sale price.