Q20-14RQ - Horngren'S Financial And Managerial Accounting

Question

What is the breakeven point?

 

Step-by-Step Solution

Answer

Answer

 

The breakeven point is company at no profit or loss condition because contribution is equal to total fixed cost.

 

Step 1: Breakeven point

The level of sales at which total sales are equal to total of variable and fixed costs is known as the breakeven point. In other words, the operating income at this level is zero.

Step 2: Three assumptions of breakeven point

1. Equation approach
2. Contribution margin approach
3. Contribution margin ratio approach