True or false: at break-even

Exercise and reference answers

Questions

1. Statement is true

   Yes

   Statement

   At break-even, total cost equals total sales revenue.

2. Statement is true

   Yes

   Statement

   At break-even there is neither profit nor loss.

3. Statement is true

   Yes

   Statement

   Beyond break-even, a higher P/V ratio grows profit faster.

4. Statement is true

   No

   Statement

   Contribution must cover variable cost before fixed cost.

5. Statement is true

   No

   Statement

   Margin of safety is the sales below the break-even point.

Instructions

Decide whether each statement about the break-even point is true.

Explanation