Breakeven

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| By MiffBiz

MiffBiz

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Quizzes Created: 3 | Total Attempts: 3,149

Questions: 5 | Attempts: 834 | Updated: Mar 20, 2023

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This is a quick quiz to test your knowledge of breakeven

Questions and Answers

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 loss

Explanation
This is the whole concept of breakeven. You want to know when all costs are covered by revenue

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3
0
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 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
Correct Answer
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
Correct Answer
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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0
1
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 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

Breakeven

What is a business doing at the breakeven point?

At the breakeven point...

If the variable cost of an item is £10 and its selling price is £25, what is the contribution?

Carrying on from question 3 now. Fixed costs are £60,000. Calculate the breakeven point

Why is it important for businesses to know the breakeven points of their products?