COST ACCOUNTING
INFORMATION FOR DECISION MAKING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Total Costs/Contribution per unit
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Fixed Costs/Contribution per unit
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Fixed Costs/Total Contribution
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Total Costs-Total Revenue
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Detailed explanation-1: -How to calculate a break-even point based on units: Divide fixed costs by the revenue per unit minus the variable cost per unit. The fixed costs are those that do not change no matter how many units are sold.
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. Here’s What We’ll Cover: What Is the Break-Even Point?
Detailed explanation-3: -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-4: -Take your total cost of production and subtract your variable costs multiplied by the number of units you produced. This will give you your total fixed cost.