Which of the following best represents the formula for the break-even point?
A) Total variable costs divided by (price minus variable costs)
B) Total variable costs divided by (price minus fixed costs)
C) Total fixed costs divided by (price minus variable costs)
D) Total fixed costs divided by (price minus fixed costs)
E) Total revenue divided by (price minus fixed costs)

Question

Quizplus · Accepted Answer

The formula for the break-even point is total fixed costs divided by (price per unit minus variable cost per unit). This is because when the price per unit minus variable cost per unit equals the contribution margin (the amount that each unit sold contributes to covering your fixed costs), then you have reached the break-even point where you are not making a profit, but you are not losing money either.

Which of the Following Best Represents the Formula for the Break-Even