COST ACCOUNTING
COST VOLUME PROFIT ANALYSIS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Fixed cost divide by contribution margin per unit
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Fixed cost divide by contribution margin ratio
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Fixed cost divide by net profit per unit
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Fixed cost divide by net profit ratio
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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. Here’s What We’ll Cover: What Is the Break-Even Point?
Detailed explanation-2: -Break-even point in units = Fixed costs ÷ Contribution margin per unit. Your break-even point in units will tell you exactly how many units you need to sell to turn a profit. If you’re able to sell more units beyond this point, you’ll be making a profit.
Detailed explanation-3: -Break-Even Point (Unit) = INR 10, 00, 000/ INR 200 = 5000 units. To derive break-even point in INR: Multiply 5, 000 units with the selling price of INR 600 per unit.
Detailed explanation-4: -Total profit at the break-even point is zero.