Calculating Break Even

What are fixed costs?

• Expenses that do not change regardless of production or sales level.

• Expenses that are not related to the business operations.

• Expenses that are only incurred once.

• Expenses that vary depending on production or sales level.

Give an example of a fixed cost.

• Salaries

• Utilities

• Advertising

• Rent

What are variable costs?

• Expenses that remain constant regardless of the activity or volume of a company's business.

• Expenses that change in proportion to the activity or volume of a company's business.

• Expenses that are unrelated to the activity or volume of a company's business.

• Expenses that are only incurred once in a company's lifetime.

Give an example of a variable cost.

• Cost of raw materials

• Cost of labor

• Cost of machinery

• Cost of advertising

What is revenue?

• The value of a company's assets minus its liabilities.

• The amount of money a company has in its bank account.

• Total expenses incurred by a company from its normal business activities.

• Total income generated by a company from its normal business activities.

How is revenue calculated?

• Price x Quantity

• Price - Quantity

• Price + Quantity

• Price / Quantity

What is the break-even point?

• The break-even point is the point at which total revenue is less than total costs.

• The break-even point is the point at which total revenue exceeds total costs.

• The break-even point is the point at which total revenue equals total costs.

• The break-even point is the point at which total revenue is equal to half of the total costs.

How is the break-even point calculated?

• Fixed costs divided by contribution margin per unit

• Contribution margin per unit divided by fixed costs

• Total costs divided by contribution margin per unit

• Variable costs divided by contribution margin per unit

What happens if the revenue is greater than the total costs?

• The business has broken even.

• The business has made a loss.

• The business has made a profit.

• The business has not made any profit or loss.

What happens if the revenue is less than the total costs?

• The company is experiencing a profit.

• The company is experiencing a loss.

• The company is breaking even.

• The company is bankrupt.