Which one of the following statements is correct?
A)At the accounting break-even level,the pretax profit is equal to the aftertax profit.
B)The contribution margin is equal to sales minus fixed costs.
C)Taxes are considered when computing the accounting break-even point but not the financial break-even point.
D)The larger the contribution margin,the higher the financial break-even point.
E)The accounting break-even point is higher than the financial break-even point for the same project.

Question

Quizplus · Accepted Answer

At the accounting break-even level, a company's total revenues are exactly equal to its total expenses (including both variable and fixed costs), but before any taxes are applied. Therefore, at this point, there is no profit to be taxed, making the pretax profit equal to zero, which is also equal to the aftertax profit (since there is no profit, there are no taxes, and thus no difference between pretax and aftertax profit).

Which One of the Following Statements Is Correct