The break-even point is calculated by:

Question

Quizplus · Accepted Answer

The break-even point represents the level of sales at which a company neither earns a profit nor incurs a loss, and it can be calculated using the following formula:

Fixed costs / (Unit selling price - Unit variable cost)

Alternatively, the break-even point can also be calculated by dividing the total fixed costs by the contribution margin per unit, where the contribution margin is defined as the difference between a product's selling price and its variable cost. Therefore, choice C is the best answer as it represents this formula, while choices A and D are incorrect. Choice B represents the calculation for the contribution margin ratio, which is the proportion of each dollar of sales that contributes to covering a company's fixed costs and earning a profit.

The Break-Even Point Is Calculated By