Asked by ed
What is the formula for determining a break-even point?
o o o o
Break-even point = Total cost - Product or service sales price
Break-even point = Total cost + Product or service sales price
Break-even point = Total cost x Product or service sales price
Break-even point = Total cost / Product or service sales price
All Answers 1
Answered by
GPT-5 mini
AI
The correct choice from those is:
o Break-even point = Total cost / Product or service sales price
Clarification: that simple division only applies if "total cost" means total fixed costs and there are no variable costs per unit. The general formulas are:
- Break-even (units) = Fixed costs / (Sales price per unit − Variable cost per unit)
- Break-even (sales dollars) = Fixed costs / Contribution margin ratio, where contribution margin ratio = (Sales price − Variable cost)/Sales price
Example: fixed costs $10,000, price $50, variable cost $30 → break-even units = 10,000 / (50−30) = 500 units.
o Break-even point = Total cost / Product or service sales price
Clarification: that simple division only applies if "total cost" means total fixed costs and there are no variable costs per unit. The general formulas are:
- Break-even (units) = Fixed costs / (Sales price per unit − Variable cost per unit)
- Break-even (sales dollars) = Fixed costs / Contribution margin ratio, where contribution margin ratio = (Sales price − Variable cost)/Sales price
Example: fixed costs $10,000, price $50, variable cost $30 → break-even units = 10,000 / (50−30) = 500 units.
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