ENTREPRENEURIAL OPERATIONS
PRODUCTION PLANNING AND CONTROL
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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What assumption does this statement say “Break even is 54 units”?
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if we sell 55 we aren’t making a profit
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if we sell 54 we begin to make a profit
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if we sell 55 we begin to make a profit
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if we sell 54 we are not yet at break even point
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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.
Detailed explanation-2: -Break-even revenue equals fixed costs divided by contribution margin ratio, which equals contribution margin divided by total revenue. The contribution margin is equal to the difference between revenue and variable costs.
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