Breakeven

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| By MiffBiz
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Quizzes Created: 3 | Total Attempts: 3,149
Questions: 5 | Attempts: 834

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Economics Quizzes & Trivia

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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  • 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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  • 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
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