Breakeven
This is a quick quiz to test your knowledge of breakeven
- 1.
What is a business doing at the breakeven point?
- A.
Making a profit
- B.
Making a loss
- C.
Making neither a profit or a loss
- D.
Making both a profit and a loss
Correct Answer
C. Making neither a profit or a lossExplanation
This is the whole concept of breakeven. You want to know when all costs are covered by revenueRate this question:
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- 2.
At the breakeven point...
- A.
Fixed costs - Variable costs = Sales revenue
- B.
Fixed costs + Variable costs = Sales revenue
- C.
Fixed costs x Variable costs = Sales revenue
- D.
Fixed costs/Variable costs = Sales revue
Correct Answer
B. 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?
- A.
£35
- B.
-£15
- C.
Don't know
- D.
£15
Correct Answer
D. £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
- A.
£5,000
- B.
£4,000
- C.
£6,000
- D.
Don't know
Correct Answer
B. £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?
- A.
It isn't important
- B.
So they can use the information when preparing financial statements
- C.
It can be used in the process of planning
- D.
Because its an important calculation in accounting
Correct Answer
C. 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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