The formula for the break-even point is the same as the formula to attain a given target operating profit for the special case where the target operating profit is zero.

Question

Quizplus · Accepted Answer

The formula for the break-even point is Total Fixed Costs / (Sales Price per Unit - Variable Cost per Unit). This is the same formula used to attain a given target operating profit, except in that case the numerator of the equation would be Total Fixed Costs plus the target operating profit. However, if the target operating profit is zero, then the numerator reverts back to Total Fixed Costs, making the formula for the break-even point and the formula to attain a given target operating profit the same.

The Formula for the Break-Even Point Is the Same as the Formula