Which of the following statements about using the equation method to determine the break-even point is TRUE?
A)Operating income in the equation is set equal to the target income for the year.
B)Operating income in the equation assumes that fixed costs are nil.
C)Revenue in the equation includes only operating revenues plus fixed costs.
D)The number of units required to reach the break-even point tends to be higher (as it incorporates total costs)using this method than when using the contribution margin method.
E)Operating income in the equation is set equal to nil.

Question

Quizplus · Accepted Answer

The break-even point is where operating income is zero, so in the equation method, operating income is set equal to nil to find the point where total revenues equal total costs.

Which of the Following Statements About Using the Equation Method