Cost Accounting Quiz: Break Even Point
20 questions · exam conditions
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Break Even PointQuestion 1 of 20

Product A CM=10,productBCM=10, product B CM=15; mix is 3 units of A per 2 units of B. Fixed costs $60,000. Total BEP in units?

6,000 units
4,800 units
5,000 units
2,400 units
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Cost Accounting Quiz

Cost Accounting Quiz: Break Even Point

Practice Break Even Point in Cost Accounting with focused quiz questions that help you check what you know, review explanations, and build confidence with test-style prompts.

What this quiz covers

This quiz focuses on Break Even Point, giving you a quick way to practice the rules, question types, and explanations that matter most for Cost Accounting.

How to use this quiz

Try each quiz question before looking at the correct answer. Use the explanations to review missed ideas, then come back to similar questions until the pattern feels familiar.

All questions

Question 1

Product A CM=10,productBCM=10, product B CM=15; mix is 3 units of A per 2 units of B. Fixed costs $60,000. Total BEP in units?

  1. 6,000 units
  2. 4,800 units
  3. 5,000 units (correct answer)
  4. 2,400 units
Explanation: A bundle of 3 A units and 2 B units has CM of 3(10)+2(15)=60 over 5 units, so average CM is 60/5=12. Divide fixed costs by that: 60,000/12=5,000 total units. The tempting 4,800 uses a simple average of 10 and 15, which ignores the 3-to-2 mix.

Question 2

Capacity is 20,000 units; price $10; variable cost $6; fixed costs $50,000. BEP is what percent of capacity?

  1. 62.5% (correct answer)
  2. 60.0%
  3. 50.0%
  4. 40.0%
Explanation: Contribution margin per unit is $10 - $6 = $4, so break-even is $50,000 / $4 = 12,500 units. Divided by capacity of 20,000 units, that gives 12,500 / 20,000 = 62.5%. A tempting wrong answer is 40%, which is just the contribution margin ratio; it ignores fixed costs and the capacity relationship.

Question 3

At 8,000 units, total cost is $96,000; at 12,000 units, $120,000. Price is $9. BEP in units?

  1. 32,000 units
  2. 40,000 units
  3. 16,000 units (correct answer)
  4. 24,000 units
Explanation: Variable cost per unit is (120,000 - 96,000)/(12,000 - 8,000) = $6. Fixed cost is 96,000 - 8,000 x $6 = $48,000. Contribution margin per unit is $9 - $6 = $3, so break-even is 48,000 / 3 = 16,000 units. The tempting error is treating $96,000 as fixed cost, which gives 32,000 units.

Question 4

Price $40, variable cost $24, fixed costs $96,000. After fixed costs fall 20% and variable costs rise $4, BEP in units?

  1. 6,400 units (correct answer)
  2. 4,800 units
  3. 8,000 units
  4. 6,000 units
Explanation: Fixed costs fall to 96,000 times 0.8 = 76,800. Variable cost rises to 28, so contribution margin is 40 minus 28 = 12 per unit. Break-even is 76,800 divided by 12 = 6,400 units. A common trap is using the old contribution margin of 16 with the new fixed costs, which gives 4,800; you must apply both changes.

Question 5

Break-even is 8,000 units; at 10,000 units, operating income is $30,000. Fixed costs?

  1. $30,000
  2. $150,000
  3. $240,000
  4. $120,000 (correct answer)
Explanation: The 2,000 units above break-even produce the 30,000 profit, so contribution margin per unit is 30,000 / 2,000 = 15. At break-even, total contribution equals fixed costs: 8,000 x 15 = 120,000. The tempting mistake is treating 30,000 as fixed costs, but it is profit from only the extra 2,000 units.

Question 6

Price $30, variable cost $18, fixed cost $90,000. To reduce BEP to 6,000 units, fixed costs must fall by how much?

  1. $72,000
  2. $18,000 (correct answer)
  3. $7,500
  4. $1,500
Explanation: Contribution margin per unit is $30 - $18 = $18. Current break-even is $90,000 / $12 = 7,500 units. At 6,000 units, fixed cost can only be 6,000 x $12 = $72,000, so fixed cost must drop by $90,000 - $72,000 = $18,000. The $72,000 figure is the revised fixed-cost total, not the required reduction.

Question 7

Price $40, variable cost $25, fixed $90,000. A $20,000 fixed salary becomes a $5-per-unit commission. BEP in units?

  1. 7,000 units (correct answer)
  2. 6,000 units
  3. 9,000 units
  4. 4,667 units
Explanation: Subtract the $20,000 salary from fixed costs: 90,000 - 20,000 = 70,000. Add the $5 commission to variable cost: 25 + 5 = 30, so contribution margin is 40 - 30 = 10. Break-even is 70,000 / 10 = 7,000 units. A tempting wrong answer is 6,000 units from using original fixed costs and contribution margin, ignoring both changes.

Question 8

Sales $500,000, variable costs $300,000, fixed costs $150,000. A $30,000 salary increase is added. New BEP in dollars?

  1. $180,000
  2. $375,000
  3. $405,000
  4. $450,000 (correct answer)
Explanation: Contribution margin is 200,000 on 500,000 sales, a 40% ratio. Add the 30,000 salary to fixed costs: 150,000 + 30,000 = 180,000. New break-even = 180,000 / 0.40 = 450,000. The tempting error is $405,000, which just adds the salary amount to the old break-even; you must divide the added fixed cost by the 40% contribution margin ratio.

Question 9

CM ratios: X=40%, Y=20%; sales mix 60% X, 40% Y; fixed costs $84,000. BEP dollars?

  1. $280,000
  2. $262,500 (correct answer)
  3. $210,000
  4. $420,000
Explanation: Weight the CM ratios by the sales mix: 60% of 40% plus 40% of 20% gives 24% plus 8%, or a 32% overall CM ratio. Then break-even dollars equals fixed costs divided by CM ratio: 84,000 / 0.32 = 262,500. Using a simple average of the two CM ratios, 30%, gives 280,000, but the mix must be weighted.

Question 10

Sales are $800,000, fixed costs $240,000, and operating income $80,000. What is BEP in sales dollars?

  1. $600,000 (correct answer)
  2. $400,000
  3. $480,000
  4. $320,000
Explanation: Contribution margin is fixed costs plus operating income: 240,000 + 80,000 = 320,000, so the CM ratio is 320,000 / 800,000 = 40%. Therefore break-even sales = 240,000 / 0.40 = $600,000. The tempting $400,000 error divides fixed costs by the 60% variable-cost ratio instead of the 40% contribution-margin ratio.

Question 11

Current sales are $600,000; the margin of safety ratio is 25%. What are break-even sales?

  1. $750,000
  2. $150,000
  3. $450,000 (correct answer)
  4. $800,000
Explanation: Margin of safety ratio equals (current sales - break-even sales) / current sales. With a 25% margin, break-even is 75% of current sales: 600,000 x .75 = 450,000. A tempting error is 150,000, but that is the margin of safety in dollars, not break-even sales.

Question 12

Price $80, VC is 40% of sales, FC $90,000. Price rises 25%; VC ratio unchanged. Break-even units?

  1. 1,875 units
  2. 1,500 units (correct answer)
  3. 1,324 units
  4. 900 units
Explanation: The new price is $100 (80 x 1.25), and variable cost stays 40% of sales, so it is $40 per unit. Contribution margin is $100 - $40 = $60, and $90,000 / $60 = 1,500 units. The trap is 1,875 units, which uses the old $80 price and $48 contribution margin; you must recalculate the new price first.

Question 13

Price $25, VC $15, FC $200,000. Automation raises FC $50,000 and cuts VC $3. New break-even units?

  1. 19,231 units (correct answer)
  2. 25,000 units
  3. 15,385 units
  4. 20,000 units
Explanation: After automation, fixed costs are 250,000 and variable cost is 12, so contribution margin is 13. Break-even is 250,000 / 13 = 19,231 units. A tempting mistake is to use the old variable cost of 15 with the new fixed costs, giving 25,000, but the $3 VC cut must be included.

Question 14

X: SP $10, VC $4; Y: SP $20, VC $10. Mix is 2 X per 1 Y. FC $44,000. Total break-even units?

  1. 4,400 units
  2. 5,500 units
  3. 7,333 units
  4. 6,000 units (correct answer)
Explanation: Each bundle has 2 X and 1 Y, so bundle contribution is 2(10 - 4) + 1(20 - 10) = 22. Fixed costs of 44,000 / 22 = 2,000 bundles, which means 4,000 X and 2,000 Y, or 6,000 total units. Don't average the contributions as 8; that gives 5,500 and ignores the 2:1 mix.

Question 15

Price is $40, VC is $25, fixed costs are $90,000. What is the break-even point in sales dollars?

  1. $240,000 (correct answer)
  2. $144,000
  3. $150,000
  4. $6,000
Explanation: Contribution margin is 15 per unit, which is 37.5% of the 40 price. Divide fixed costs of 90,000 by 0.375 to get break-even sales of 240,000. The 6,000 figure is break-even in units, not dollars; multiply it by 40 to reach sales dollars.

Question 16

A marketing manager proposes a new advertising campaign that will cost $45,000. The company's product has a contribution margin of $15 per unit. The manager claims the campaign will increase sales by 4,000 units. What is the break-even point for the advertising campaign itself, in terms of the number of units that must be sold to cover the campaign's cost?

  1. 4,000 units
  2. 3,000 units (correct answer)
  3. 1,000 units
  4. Cannot be determined without total fixed costs
Explanation: The question asks for the incremental break-even point specifically for the campaign, not the new break-even point for the entire company. This is calculated by finding how many incremental units must be sold to generate enough contribution margin to cover the incremental fixed cost of the campaign.
  • Incremental Break-Even Units = Incremental Fixed Costs / Contribution Margin per Unit
  • Incremental Break-Even Units = $45,000 / $15 = 3,000 units.
This means the campaign becomes profitable for the company after the 3,000th additional unit is sold.

Question 17

A company is evaluating whether to automate a production process. The current process has fixed costs of $200,000 and a variable cost of $30 per unit. The proposed automated process would have fixed costs of $500,000 but would reduce the variable cost to $10 per unit. The selling price is $50 per unit. By how many units will the break-even point change if the company automates?

  1. It will increase by 15,000 units.
  2. It will increase by 2,500 units. (correct answer)
  3. It will decrease by 2,500 units.
  4. It will increase by 10,000 units.
Explanation: The question requires calculating the break-even point for both scenarios and then finding the difference.
  1. Calculate the break-even point for the current process:
    • Current Contribution Margin (CM) = $50 (Price) - $30 (VC) = $20 per unit.
    • Current Break-Even Point = $200,000 (Fixed Costs) / $20 (CM) = 10,000 units.
  2. Calculate the break-even point for the proposed automated process:
    • Proposed Contribution Margin (CM) = $50 (Price) - $10 (VC) = $40 per unit.
    • Proposed Break-Even Point = $500,000 (Fixed Costs) / $40 (CM) = 12,500 units.
  3. Calculate the change in the break-even point:
    • Change = Proposed BEP - Current BEP = 12,500 units - 10,000 units = 2,500 units increase.

Question 18

A company currently sells 25,000 units of its product for $40 each. Total fixed costs are $180,000 and variable costs are $28 per unit. By how many units can sales drop before the company incurs an operating loss?

  1. 15,000 units
  2. 10,000 units (correct answer)
  3. 25,000 units
  4. 6,429 units
Explanation: This question asks for the margin of safety in units, which is the difference between current sales and break-even sales. The company starts incurring a loss if sales drop below the break-even point.
  1. Calculate the contribution margin per unit:
    • CM per unit = $40 (Price) - $28 (VC) = $12.
  2. Calculate the break-even point in units:
    • BEP (units) = Total Fixed Costs / CM per unit = $180,000 / $12 = 15,000 units.
  3. Calculate the margin of safety in units:
    • Margin of Safety = Current Sales Units - Break-Even Sales Units = 25,000 - 15,000 = 10,000 units. This is the amount by which sales can drop before a loss occurs.

Question 19

At a production level of 8,000 units, a company's total manufacturing costs were $280,000. At a production level of 12,000 units, the total manufacturing costs were $360,000.

At a production level of 10,000 units, a company's total manufacturing costs were $380,000. At a production level of 15,000 units, the total manufacturing costs were $480,000. Given this cost behavior, and assuming a selling price of $50 per unit, what is the break-even point in units?

  1. 15,000 units
  2. 10,000 units
  3. 7,600 units
  4. 6,000 units (correct answer)
Explanation: First, use the high-low method to separate the mixed costs into their fixed and variable components.
  1. Calculate the variable cost per unit:
    • Variable Cost per Unit = (Change in Cost) / (Change in Activity) = ($480,000 - $380,000) / (15,000 units - 10,000 units) = $100,000 / 5,000 units = $20 per unit.
  2. Calculate the total fixed costs: Use either the high or low data point.
    • Using the high point: Fixed Costs = Total Cost - (Variable Cost per Unit × Activity Level) = 480,000−(480,000 - (20 × 15,000) = $480,000 - $300,000 = $180,000.
  3. Calculate the contribution margin per unit:
    • Contribution Margin per Unit = Selling Price - Variable Cost per Unit = $50 - $20 = $30.
  4. Calculate the break-even point in units:
    • Break-Even Units = Total Fixed Costs / Contribution Margin per Unit = $180,000 / $30 = 6,000 units.

Question 20

A company has two divisions, East and West. The company's total fixed costs are $500,000, of which $150,000 are common fixed costs allocated equally to the two divisions.

The East division sells a product for $50 with variable costs of $20. Its direct, traceable fixed costs are $180,000. What is the break-even point in sales dollars for the East division, considered as a standalone segment?

  1. $300,000 (correct answer)
  2. $425,000
  3. $255,000
  4. $600,000
Explanation: For segment-level break-even analysis, only the traceable fixed costs of that segment should be considered. Allocated common fixed costs are irrelevant for this calculation, as they would continue to exist even if the segment were eliminated.
  1. Identify the relevant fixed costs for the East division: The relevant costs are the direct, traceable fixed costs, which are $180,000.
  2. Calculate the contribution margin (CM) ratio for the East division's product:
    • CM per unit = $50 (Price) - $20 (VC) = $30.
    • CM Ratio = $30 / $50 = 0.60 or 60%.
  3. Calculate the segment break-even point in sales dollars:
    • Segment Break-Even Sales = Traceable Fixed Costs / CM Ratio = $180,000 / 0.60 = $300,000.