Question

Break-even analysis:

(A) identifies the optimal maximum level of output for any given level of fixed assets.
(B) based on accounting profits is preferable to the financial (or present value) break-even method.
(C) identifies the optimal sales price for any new product.
(D) ignores both taxes and interest when computing the financial break-even point.
(E) provides a means of determining the minimal number of units that need to be sold to prevent a financial loss.

Answer 1

The correct answer is E: provides a means of determining the minimal number of units that need to be sold to prevent a financial loss.

Step-by-step explanation:

The break-even analysis is a tool that provides the level of units or sales necessary to cover both variable and fixed costs. It can include profit. The formula is:

Break-even point= fixed costs/ contribution margin

Break-even point (dollars) fixed costs/ contribution margin ratio