Break Even Analysis MCQs 2026

Break-even analysis is a part of

1. Atax planning✓
2. Bexternal auditing✓
3. Cinventory valuation✓
4. Dcost-volume-profit (CVP) analysis✓

Profit at any level of sales can be calculated as

1. Asales minus fixed cost✓
2. Bcontribution plus fixed cost✓
3. Csales times the P/V ratio✓
4. Dtotal contribution minus fixed costs✓

Contribution per unit is calculated as

1. Aselling price plus variable cost✓
2. Bselling price per unit minus variable cost per unit✓
3. Cfixed cost per unit✓
4. Dsales minus fixed cost✓

The break-even point is the level of output or sales at which

1. Aprofit is maximum✓
2. Bprofit is highest✓
3. Ctotal revenue equals total cost, so there is no profit or loss✓
4. Dfixed cost is zero✓

A higher margin of safety indicates

1. Ahigher risk✓
2. Blower profit✓
3. Ca lower risk of making a loss✓
4. Dhigher fixed cost✓

In CVP analysis, costs are classified into

1. Adirect and indirect only✓
2. Bprime and overhead✓
3. Cfixed and variable components✓
4. Dcapital and revenue✓

The angle of incidence on a break-even chart indicates the

1. Afixed cost✓
2. Bvariable cost✓
3. Cbreak-even point only✓
4. Drate at which profit is earned once break-even is passed✓

To find the sales required to earn a target profit, use (fixed costs plus target profit) divided by

1. Acontribution per unit✓
2. Bthe selling price✓
3. Cthe variable cost✓
4. Dtotal sales✓

If fixed costs are Rs 40,000, selling price Rs 20 and variable cost Rs 12 per unit, the break-even point in units is

1. A2,000✓
2. B5,000✓
3. C8,000✓
4. D3,333✓

With fixed cost Rs 40,000 and contribution Rs 8 per unit, the units needed for a profit of Rs 16,000 are

1. A5,000✓
2. B7,000✓
3. C2,000✓
4. D10,000✓

At the break-even point, total contribution is exactly equal to

1. Atotal fixed costs✓
2. Btotal variable costs✓
3. Ctotal sales✓
4. Dprofit✓

A limitation of break-even analysis is that it assumes

1. Acosts change randomly✓
2. Ba linear relationship of cost and revenue with output over the relevant range✓
3. Cno fixed costs at all✓
4. Dmany different selling prices at once✓

The break-even point is not affected by a change in

1. Athe number of units sold (volume) alone✓
2. Bfixed cost✓
3. Cselling price✓
4. Dvariable cost per unit✓

The P/V ratio can be improved by

1. Aincreasing variable cost✓
2. Breducing the selling price✓
3. Cincreasing selling price or reducing variable cost per unit✓
4. Dincreasing fixed cost✓

An increase in fixed costs, other things equal, will

1. Alower the break-even point✓
2. Bnot change the break-even point✓
3. Creduce variable cost✓
4. Draise the break-even point✓

An increase in the selling price per unit, other things equal, will

1. Araise the break-even point✓
2. Bnot change contribution✓
3. Cincrease variable cost✓
4. Dlower the break-even point✓

The break-even chart plots costs and revenue against

1. Atime✓
2. Bthe level of activity (output/sales)✓
3. Cprofit only✓
4. Dfixed cost✓

If fixed costs increase while contribution per unit stays the same, the margin of safety will

1. Aincrease✓
2. Bstay the same✓
3. Cdecrease (as the break-even point rises)✓
4. Dalways become zero✓

The break-even point in sales value can also be found as break-even units multiplied by the

1. Avariable cost✓
2. Bselling price per unit✓
3. Cfixed cost✓
4. DP/V ratio✓

At the break-even point, total variable costs are

1. Acovered by part of the sales revenue, with the rest covering fixed costs✓
2. Bzero✓
3. Cgreater than sales✓
4. Dequal to profit✓

A product should generally be continued in the short run as long as it earns a positive

1. Afixed cost✓
2. Bcontribution✓
3. Cselling price✓
4. Dtax✓

If a firm's P/V ratio is high, it means

1. Acontribution is low✓
2. Bvariable cost is high✓
3. Cthe selling price is low✓
4. Deach rupee of sales contributes a large amount toward fixed costs and profit✓

The break-even point and margin of safety together help assess a business's

1. Atax liability✓
2. Bshare price✓
3. Crisk and profitability at different sales levels✓
4. Daudit quality✓

If variable cost per unit rises while price and fixed cost are unchanged, the break-even point will

1. Afall✓
2. Bstay the same✓
3. Crise✓
4. Dbecome zero✓

The difference between sales and variable costs is

1. Anet profit✓
2. Bcontribution✓
3. Cfixed cost✓
4. Dgross margin only✓

In CVP analysis, the term volume refers to

1. Athe level of output or activity✓
2. Bthe noise level✓
3. Cthe cash balance✓
4. Dthe tax rate✓

Break-even analysis is most useful for

1. Along-term capital budgeting only✓
2. Bvaluing goodwill✓
3. Cexternal auditing✓
4. Dshort-term profit planning and decision making✓

The main output of a cost-volume-profit study is to show how profit changes with changes in

1. Atax only✓
2. Bthe auditor✓
3. Cthe share price✓
4. Dcosts, volume and selling price✓

The formula for the break-even point in units is fixed cost divided by

1. Acontribution margin per unit✓
2. Bthe P/V ratio✓
3. Ctotal sales✓
4. Dvariable cost per unit✓

In a multi-product firm, break-even analysis usually assumes a constant

1. Aselling price only✓
2. Bfixed cost per unit✓
3. Ctotal variable cost✓
4. Dsales mix (product mix)✓

Contribution is used first to cover fixed costs and then to provide

1. Aprofit✓
2. Bmore variable cost✓
3. Cdividends only✓
4. Dtax✓

Cost-volume-profit analysis primarily helps management in

1. Aexternal auditing✓
2. Btax filing✓
3. Cplanning profit and making short-term decisions✓
4. Drecording cash receipts✓

When a company sells exactly at its break-even point, its net profit is

1. Apositive✓
2. Bequal to fixed cost✓
3. Cequal to sales✓
4. Dzero✓

If the P/V ratio is 40% and fixed costs are Rs 80,000, the break-even sales value is

1. ARs 200,000✓
2. BRs 32,000✓
3. CRs 120,000✓
4. DRs 80,000✓

If the selling price is Rs 50 and variable cost is Rs 30, the contribution margin ratio is

1. A60%✓
2. B40%✓
3. C30%✓
4. D100%✓

Which of the following is an assumption of break-even analysis

1. Aselling price changes with volume✓
2. Bfixed cost varies per unit of output✓
3. Cselling price and variable cost per unit remain constant✓
4. Dall costs are variable✓

The margin of safety can be expressed as a percentage by dividing the margin of safety by

1. Atotal (actual) sales✓
2. Bfixed cost✓
3. Cvariable cost✓
4. Dprofit✓

If contribution is Rs 60,000 and sales are Rs 150,000, the P/V ratio is

1. A60%✓
2. B25%✓
3. C40%✓
4. D90%✓

If actual sales are Rs 500,000 and break-even sales are Rs 300,000, the margin of safety is

1. ARs 800,000✓
2. BRs 300,000✓
3. CRs 200,000✓
4. DRs 500,000✓

The contribution margin ratio is also known as the

1. Amargin of safety ratio✓
2. Bprofit-volume (P/V) ratio✓
3. Ccurrent ratio✓
4. Dgearing ratio✓

The margin of safety is the excess of

1. Afixed cost over variable cost✓
2. Bvariable over fixed cost✓
3. Csales over profit✓
4. Dactual (or budgeted) sales over the break-even sales✓

The break-even point in sales value (revenue) equals fixed costs divided by the

1. Acontribution per unit✓
2. Bcontribution margin (P/V) ratio✓
3. Cselling price✓
4. Dvariable cost✓

The contribution margin (P/V) ratio equals contribution divided by

1. Asales✓
2. Bfixed cost✓
3. Cvariable cost✓
4. Dprofit✓

The break-even point in units equals total fixed costs divided by

1. Acontribution per unit✓
2. Bthe selling price✓
3. Cthe variable cost✓
4. Dtotal sales✓

The relevant range is the range of activity over which

1. Acosts are irrelevant✓
2. Bprofit is always zero✓
3. Csales are unlimited✓
4. Dthe assumptions about fixed and variable cost behaviour hold true✓