# Breakeven

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MiffBiz
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Quizzes Created: 3 | Total Attempts: 3,123
Questions: 5 | Attempts: 821

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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

C. Making neither a profit or a loss
Explanation
This is the whole concept of breakeven. You want to know when all costs are covered by revenue

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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

B. Fixed costs + Variable costs = Sales revenue
Explanation
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.

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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

D. £15
Explanation
Contribution is the accounting term we use for Selling price - variable costs. It forms the bottom section of all breakeven point calcuations

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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

B. £4,000
Explanation
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 £15

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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

C. It can be used in the process of planning
Explanation
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.

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• Current Version
• Mar 20, 2023
Quiz Edited by
ProProfs Editorial Team
• Jan 09, 2017
Quiz Created by
MiffBiz

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