# ECONOMICS

## COST ACCOUNTING

### COST VOLUME PROFIT ANALYSIS

 Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
Which formula is TRUE about break even point in unit?
 A (Fixed cost + Profit)/CM ratio B Sales = VC + FC + Profit C Profit = Sales + VC + FC D Profit = Sales + VC + FC
Explanation:

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 Sales = Total Fixed Costs / (Contribution Margin) Contribution Margin = 1-(Variable Costs / Revenues)

Detailed explanation-3: -The break-even point is the point at which total cost and total revenue are equal, meaning there is no loss or gain for your small business. In other words, you’ve reached the level of production at which the costs of production equals the revenues for a product.

Detailed explanation-4: -Fixed costs (FC) remain the same, regardless of your output. Rent, insurance, and base salaries are examples of fixed costs. Variable costs (VC) change with the number of units produced or sold. Examples are materials, sales commissions, and direct labor costs.

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