Question

Break-even analysis is carried out to find the point where the following are equal

• A. Overhead cost and fixed cost
• B. Holding cost and ordering cost
• C. Sales volume value and overall cost
• D. None of the above

Answer 1

Answer:

C. Sales volume value and overall cost

Break-even analysis is used to determine the sales volume required for a company to neither earn a profit nor suffer a loss. It is the point where total costs equal total sales. The formula for BEP is BEP = F/(s-v), where F is total fixed cost, s is selling cost per unit, and v is variable cost per unit. If sales revenue is greater than total cost, there will be a profit and if sales revenue is less than total cost, there will be a loss. The break-even analysis is used to find the point where sales volume value equals overall cost.