Question

If a company is operating at the break-even point: Select one: a. its contribution margin will be equal to its variable expenses. b. its margin of safety will be equal to zero. c. its fixed expenses will be equal to its variable expenses. d. its selling price will be equal to its variable expense per unit.

Answer 1

b

Step-by-step explanation:

Breakeven quantity are the number of units produced and sold at which net income is zero

Breakeven quantity = fixed cost / price – variable cost per unit

Breakeven price = (fixed cost / quantity sold) + variable price per unit

A margin of safety (MoS) is a difference between actual/budgeted sales and breakeven sales.

At breakeven point, margin of safety would be zero