The formula for break-even point in terms of revenue is
A)Total variable costs/Contribution margin ratio
B)Total fixed costs/Contribution margin ratio
C)Total fixed costs/Unit contribution margin
D)Total variable costs/Total fixed costs

Question

Quizplus · Accepted Answer

The break-even point represents the level of sales at which the company covers all its costs and doesn't make a profit or a loss. The break-even point in terms of revenue can be calculated by dividing total fixed costs by the contribution margin ratio. The contribution margin ratio is calculated by subtracting variable costs from revenue and dividing by revenue. Therefore, the correct formula is Total fixed costs/Contribution margin ratio. Choice B matches this formula.

The Formula for Break-Even Point in Terms of Revenue Is