Cash break-even point uses:
ASales only
BFixed cost gross
CVariable cost only
DFixed cost net of non-cash items
Answer & Solution
Correct answer: D. Fixed cost net of non-cash items
1. Cash BEP focuses on the cash needed to cover ongoing cash outflows.
2. Non-cash fixed costs such as depreciation are subtracted from total fixed cost.
3. The lower numerator gives a lower cash BEP than accounting BEP.
4. Hence cash BEP uses fixed cost net of non-cash items.
_Source: ICAI BoS Inter Paper 3, Ch 14 "Marginal Costing", §14.5.3 ¶2_
Related questions
At the break-even point,A higher contribution to sales ratio implies thatIf the margin of safety is 21.875 per cent of sales, break-even sales are what share of saMargin of safety isFixed cost is 1,50,000 and contribution per unit is 15. Units needed to earn a profit of 2Fixed cost is 1,50,000 and contribution per unit is 15. The break-even point in units isSelling price is 30 per unit and variable cost is 15 per unit. The P/V ratio isContribution is defined as