Answered: What is the Breakeven formula when a…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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What is the Breakeven formula when a profit is included:

Group of answer choices

c. Fixed Costs – Contribution Margin

Variable Costs/ Profit Component

None of the above

Variable Costs + Profit Component/ Contribution Margin

Expert Solution

Step 1

Break-even point is the point at which there is no loss or no profit. It is because the sales revenue and total cost will be equal. The usual break even point formula is

$B r e a k - e v e n p o i n t = F i x e d \cos t \div (S e l l i n g p r i c e p e r u n i t - V a r i a b l e \cos t p e r u n i t)$

$B r e a k - e v e n p o i n t = F i x e d \cos t p e r u n i t \div C o n t r i b u t i o n m a r g i n p e r u n i t$

Contribution margin is the difference between the selling price per unit and variable cost per unit.

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