ECONOMICS

Detailed explanation-1: -The break-even point (BEP) or break-even level represents the sales amount-in either unit (quantity) or revenue (sales) terms-that is required to cover total costs, consisting of both fixed and variable costs to the company. Total profit at the break-even point is zero.

Detailed explanation-2: -Break-even point This is the point where your total revenue (sales or turnover) equals total costs. At this point there is no profit or loss-in other words, you ‘break even’.

Detailed explanation-3: -The break-even point indicates the point at which the costs (e.g. for the production of a product) are equal to the revenue generated by the sale. This means that the break even point is exactly £0 in total. From the point at which the break-even point is exceeded, the company makes a profit through the sale.

Detailed explanation-4: -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-5: -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.