Asked Dec 18, 2019

How does an increase in the income rate affect the breakeven point?


Expert Answer

Step 1

 Break-even sales is the dollar amount of revenue at which a business earns a profit of zero i.e. No Profit No Loss. This sale amount exactly covers the underlying fixed costs of a business, plus all the variable costs associated with the sales.

Break-even point is break-even quantity in units, where the business earns no profit no loss.

Step 2

The formula to compute break-even point:

Break-even Sale in Units = Fixed Cost ÷ Contribution Margin per unit

In case a business wishes to earn a target profit, then the bre...

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