Break Even Analysis MCQs 2026

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

1. A profit is maximum ✓
2. B profit is highest ✓
3. C total revenue equals total cost, so there is no profit or loss ✓
4. D fixed cost is zero ✓

Break-even analysis is a part of

1. A tax planning ✓
2. B external auditing ✓
3. C inventory valuation ✓
4. D cost-volume-profit (CVP) analysis ✓

Profit at any level of sales can be calculated as

1. A sales minus fixed cost ✓
2. B contribution plus fixed cost ✓
3. C sales times the P/V ratio ✓
4. D total contribution minus fixed costs ✓

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

1. A Rs 800,000 ✓
2. B Rs 300,000 ✓
3. C Rs 200,000 ✓
4. D Rs 500,000 ✓

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

1. A total (actual) sales ✓
2. B fixed cost ✓
3. C variable cost ✓
4. D profit ✓

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

1. A selling price changes with volume ✓
2. B fixed cost varies per unit of output ✓
3. C selling price and variable cost per unit remain constant ✓
4. D all costs are variable ✓

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

1. A Rs 200,000 ✓
2. B Rs 32,000 ✓
3. C Rs 120,000 ✓
4. D Rs 80,000 ✓

The break-even chart plots costs and revenue against

1. A time ✓
2. B the level of activity (output/sales) ✓
3. C profit only ✓
4. D fixed cost ✓

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

1. A raise the break-even point ✓
2. B not change contribution ✓
3. C increase variable cost ✓
4. D lower the break-even point ✓

An increase in fixed costs, other things equal, will

1. A lower the break-even point ✓
2. B not change the break-even point ✓
3. C reduce variable cost ✓
4. D raise the break-even point ✓

The P/V ratio can be improved by

1. A increasing variable cost ✓
2. B reducing the selling price ✓
3. C increasing selling price or reducing variable cost per unit ✓
4. D increasing fixed cost ✓

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

1. A total fixed costs ✓
2. B total variable costs ✓
3. C total sales ✓
4. D profit ✓

A higher margin of safety indicates

1. A higher risk ✓
2. B lower profit ✓
3. C a lower risk of making a loss ✓
4. D higher fixed cost ✓

In CVP analysis, costs are classified into

1. A direct and indirect only ✓
2. B prime and overhead ✓
3. C fixed and variable components ✓
4. D capital and revenue ✓

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

1. A fixed cost ✓
2. B variable cost ✓
3. C break-even point only ✓
4. D rate 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. A contribution per unit ✓
2. B the selling price ✓
3. C the variable cost ✓
4. D total sales ✓

Contribution per unit is calculated as

1. A selling price plus variable cost ✓
2. B selling price per unit minus variable cost per unit ✓
3. C fixed cost per unit ✓
4. D sales minus fixed cost ✓

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. A 2,000 ✓
2. B 5,000 ✓
3. C 8,000 ✓
4. D 3,333 ✓

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

1. A 5,000 ✓
2. B 7,000 ✓
3. C 2,000 ✓
4. D 10,000 ✓

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

1. A contribution per unit ✓
2. B the selling price ✓
3. C the variable cost ✓
4. D total sales ✓

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

1. A sales ✓
2. B fixed cost ✓
3. C variable cost ✓
4. D profit ✓

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

1. A contribution per unit ✓
2. B contribution margin (P/V) ratio ✓
3. C selling price ✓
4. D variable cost ✓

The margin of safety is the excess of

1. A fixed cost over variable cost ✓
2. B variable over fixed cost ✓
3. C sales over profit ✓
4. D actual (or budgeted) sales over the break-even sales ✓

The contribution margin ratio is also known as the

1. A margin of safety ratio ✓
2. B profit-volume (P/V) ratio ✓
3. C current ratio ✓
4. D gearing ratio ✓

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

1. A 60% ✓
2. B 25% ✓
3. C 40% ✓
4. D 90% ✓

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

1. A the number of units sold (volume) alone ✓
2. B fixed cost ✓
3. C selling price ✓
4. D variable cost per unit ✓

A limitation of break-even analysis is that it assumes

1. A costs change randomly ✓
2. B a linear relationship of cost and revenue with output over the relevant range ✓
3. C no fixed costs at all ✓
4. D many different selling prices at once ✓

The relevant range is the range of activity over which

1. A costs are irrelevant ✓
2. B profit is always zero ✓
3. C sales are unlimited ✓
4. D the assumptions about fixed and variable cost behaviour hold true ✓

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

1. A 60% ✓
2. B 40% ✓
3. C 30% ✓
4. D 100% ✓

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

1. A positive ✓
2. B equal to fixed cost ✓
3. C equal to sales ✓
4. D zero ✓

Cost-volume-profit analysis primarily helps management in

1. A external auditing ✓
2. B tax filing ✓
3. C planning profit and making short-term decisions ✓
4. D recording cash receipts ✓

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

1. A profit ✓
2. B more variable cost ✓
3. C dividends only ✓
4. D tax ✓

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

1. A selling price only ✓
2. B fixed cost per unit ✓
3. C total variable cost ✓
4. D sales mix (product mix) ✓

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

1. A contribution margin per unit ✓
2. B the P/V ratio ✓
3. C total sales ✓
4. D variable cost per unit ✓

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

1. A increase ✓
2. B stay the same ✓
3. C decrease (as the break-even point rises) ✓
4. D always become zero ✓

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

1. A variable cost ✓
2. B selling price per unit ✓
3. C fixed cost ✓
4. D P/V ratio ✓

At the break-even point, total variable costs are

1. A covered by part of the sales revenue, with the rest covering fixed costs ✓
2. B zero ✓
3. C greater than sales ✓
4. D equal to profit ✓

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

1. A fixed cost ✓
2. B contribution ✓
3. C selling price ✓
4. D tax ✓

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

1. A contribution is low ✓
2. B variable cost is high ✓
3. C the selling price is low ✓
4. D each 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. A tax liability ✓
2. B share price ✓
3. C risk and profitability at different sales levels ✓
4. D audit quality ✓

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

1. A fall ✓
2. B stay the same ✓
3. C rise ✓
4. D become zero ✓

The difference between sales and variable costs is

1. A net profit ✓
2. B contribution ✓
3. C fixed cost ✓
4. D gross margin only ✓

In CVP analysis, the term volume refers to

1. A the level of output or activity ✓
2. B the noise level ✓
3. C the cash balance ✓
4. D the tax rate ✓

Break-even analysis is most useful for

1. A long-term capital budgeting only ✓
2. B valuing goodwill ✓
3. C external auditing ✓
4. D short-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. A tax only ✓
2. B the auditor ✓
3. C the share price ✓
4. D costs, volume and selling price ✓