Question

The formula to find the breakeven point or a target profit volume in terms of number of units that need to be sold is:

a. (Fixed expenses + variable expenses) / contribution margin per unit
b. (fixed expenses + operating income) / contribution margin per unit
c. (Fixed expenses + variable expenses) / sales revenue
d. (fixed expenses + operating income) / sales revenue

Answer 1

The formula to find the breakeven point or target profit volume in terms of the number of units that need to be sold is (Fixed expenses + variable expenses) / contribution margin per unit. To calculate the breakeven point, you need to determine the fixed expenses, variable expenses per unit, and contribution margin per unit.

Step-by-step explanation:

The formula to find the breakeven point or a target profit volume in terms of the number of units that need to be sold is option a: (Fixed expenses + variable expenses) / contribution margin per unit.

To calculate the breakeven point, you need to determine the fixed expenses, the variable expenses per unit, and the contribution margin per unit. The fixed expenses are costs that do not change with the number of units sold, such as rent and salaries. The variable expenses are costs that change with the number of units sold, such as raw materials and direct labor. The contribution margin per unit is the difference between the selling price of the unit and the variable expenses per unit.

By dividing the sum of fixed expenses and variable expenses by the contribution margin per unit, you can find the number of units that need to be sold to break even or achieve a target profit volume.