Answered: What is the Breakeven formula when a…

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter2: Building Blocks Of Managerial Accounting

Section: Chapter Questions

Problem 17MC: In the cost equation Y=a+bx, Y represents which of the following? A. fixed costs B. variable costs...

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Question

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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