CPA Business Environment and Concepts (BEC) : Breakeven Formula
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Example Questions
Example Question #145 : Cpa Business Environment And Concepts (Bec)
Breakeven analysis assumes that over the relevant range:
Unit variable costs are unchanged
Total fixed costs are nonlinear
Unit revenues are nonlinear
Total costs are unchanged
Unit variable costs are unchanged
Breakeven analysis assumes that all variable costs and revenues are constant on a per-unit basis and are linear over a relevant range. Fixed costs in total are constant.
Example Question #1 : Breakeven Formula
ABC company's breakeven point was $780,000. Variable expenses averaged 60% of sales, and the margin of safety was $130,000. What was ABC's contribution margin?
$364,000
$910,000
$546,000
$1,300,000
$364,000
The margin of safety is the excess of sales over break-even sales. Assuming variable costs are 60% of selling price, contribution margin may be computed at 40% of selling price as 40% * $780,000 + 40% * $130,000.
Example Question #1 : Breakeven Formula
A company has total sales of $80,000, total variable costs of $20,000, and total fixed costs of $30,000. What is the breakeven level in sales dollars?
$30,000
$80,000
$40,000
$50,000
$40,000
The contribution margin is sales minus variable costs (80,000-20,000) = 60,000. Then, 60,000/80,000=75%. Then, breakeven is total fixed costs of $30,000/75%=$40,000.
Example Question #2 : Breakeven Formula
A product has sales of $200,000, a contribution margin of 20%, and a margin of safety of $80,000. What is the product's fixed cost?
$96,000
$16,000
$24,000
$80,000
$24,000
($200,000 - $80,000) * 20%
Example Question #23 : Operations Management: Budgeting
What is the formula for breakeven point in units?
Total FC/CM per Unit
Total VC/CM per Unit
CM per Unit/Total FC
Total Costs/CM per Unit
Total FC/CM per Unit
This is the formula for breakeven point in units.
Example Question #24 : Operations Management: Budgeting
How does the margin of safety relate to breakeven in units or sales? It is:
A measure of profitability
Unrelated
The excess of breakeven sales over sales
The excess of sales over breakeven sales
The excess of sales over breakeven sales
The margin of safety is generally expressed as either dollars or a percentage and is the excess of sales over breakeven sales.
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