Breakeven
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What is a business doing at the breakeven point?
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Making a profit
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Making a loss
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Making neither a profit or a loss
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Making both a profit and a loss
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This is a quick quiz to test your knowledge of breakeven
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- 2.
At the breakeven point...
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Fixed costs - Variable costs = Sales revenue
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Fixed costs + Variable costs = Sales revenue
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Fixed costs x Variable costs = Sales revenue
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Fixed costs/Variable costs = Sales revue
Correct Answer
A. Fixed costs + Variable costs = Sales revenueExplanation
This is fundamental to your understanding of breakeven. Think back to Nathan. When he sold 125 cakes he made £75.00 of sales (125 x 60p). This was the same as his total variable costs £25 (125 x 20p) and this fixed costs of £50. So he didn't make a profit or a loss.Rate this question:
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- 3.
If the variable cost of an item is £10 and its selling price is £25, what is the contribution?
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£35
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-£15
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Don't know
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£15
Correct Answer
A. £15Explanation
Contribution is the accounting term we use for Selling price - variable costs. It forms the bottom section of all breakeven point calcuationsRate this question:
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- 4.
Carrying on from question 3 now. Fixed costs are £60,000. Calculate the breakeven point
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£5,000
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£4,000
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£6,000
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Don't know
Correct Answer
A. £4,000Explanation
So the formula to calculate breakeven is: Fixed costs divided by Contribution per unit.
So in this question you need to divide £60,000 by £15Rate this question:
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- 5.
Why is it important for businesses to know the breakeven points of their products?
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It isn't important
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So they can use the information when preparing financial statements
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It can be used in the process of planning
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Because its an important calculation in accounting
Correct Answer
A. It can be used in the process of planningExplanation
If a business knows the breakeven point for a particular product is 10,000 units it does not want to sell 10,000 units, it has to sell more so that it will make a profit. So at the planning stage they can come up with strategies to achieve this objective.Rate this question:
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Our quizzes are rigorously reviewed, monitored and continuously updated by our expert board to maintain accuracy, relevance, and timeliness.
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Current Version
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Mar 20, 2023Quiz Edited by
ProProfs Editorial Team -
Jan 09, 2017Quiz Created by
MiffBiz
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