The formula for calculating the break-even point is ________.
A)Break-even point = Variable costs/Fixed Costs
B)Break-even point = Fixed costs/Price-Variable costs)
C)Break-even point = Variable costs/Price-Fixed costs)
D)Break-even point = Profit/Loss
E)Break-even point = Income/Expenditure

Question

Quizplus · Accepted Answer

The formula to calculate the break-even point is based on the contribution margin, which is the difference between the selling price and the variable cost per unit. Therefore, the break-even point formula is:
Break-even Point = Fixed Costs / (Price – Variable Costs)
Choice A is incorrect because it only takes into account the variable costs, and does not consider the contribution margin or the fixed costs.
Choice C is incorrect because it takes the variable costs and divides them by the difference between the selling price and the fixed costs, which is not correct.
Choice D is incorrect because it is not a formula, but a result that may be obtained after calculating the break-even point.
Choice E is incorrect because it is an unrelated formula for calculating income and expenditure.

The Formula for Calculating the Break-Even Point Is ________