Break-Even Point

When a business has made enough money to pay its costs and begin to make a profit, it has reached its

• break-even point
• variable-cost margin
• fixed cost
• selling price

Some business costs are classified as fixed costs because they

• must be paid within a set time
• don't change when sales go up or down
• are unpredictable and must be estimated
• cost all businesses the same amount

If a business's sales double, its variable costs will also likely

• remain the same
• decrease
• increase
• double

It may be difficult for a new business to predict its variable costs because new businesses

• are sometimes short of working capital
• don't have access to industry figures
• may have inexperienced employees
• don't have past sales records

Most businesses receive the bulk of their income from

• dividends
• sales revenue
• return on investment
• capital

A business that does not reach break-even will

• go bankrupt
• have profit and loss
• lose money
• need to relocate

One of the main purposes for calculating break-even is to help the business to

• determine stock value
• prepare an income statement
• forecast sales
• set selling prices

Businesses calculate break-even in dollars so they know the

• amount of the business's after tax-earnings
• total dollar value of the stock on hand
• total dollar sales needed to reach break-even
• amount the business can spend on new purchases

Businesses calculate break-even in units so they know

• how much profit they will earn after they break even
• which products they should purchase for resale
• which costs are variable and which are fixed
• how many products they must sell to break even

What is the break-even point in units for a company whose total fixed costs are $275,450; selling price per unit is $16; and variable cost per unit is $14.75?

• 220,360
• 150,300
• 183,633
• 225,120