Title: The Break-Even Point
Course: Demo 1

Q: The formula for calculating the break-even point is:
- revenue minus expenses per unit.
- the point where profitability is achieved.
- fixed costs divided by the contribution margin per unit.
A: fixed costs divided by the contribution margin per unit.

Q: When a business owner is asked how the business is doing and she replies, “We are breaking even” what does this actually mean?
- The revenue earned for a period is less than costs incurred.
- The revenue earned for a period is more than costs incurred.
- The revenue earned and costs incurred for a period are equal.
A: The revenue earned and costs incurred for a period are equal.

Q: The break-even point for a business is:
- usually expressed in dollars or units sold
- the point where income is equal to expenses
- the point where profitability is achieved
A: usually expressed in dollars or units sold; the point where income is equal to expenses

Q: The table below shows the 12-month income statement for Jamie’s Car Wash. How many car washes must Jamie sell in order to break even?

Jamie's Car Wash
Income Statement for the period January 1, 2015 - December 31, 2015
Sales ($10 x 100,000 washes) | $1,000,000
- Variable Cost Per Wash ($6) | ($600,000)
Gross profit | $400,000
Operating expenses |
- Salaries | ($50,000)
- Rent | ($50,000)
Total Operating Expenses | ($100,000)
Net Income (Profit) | $300,000
- 100,000
- 30,000
- 25,000
A: 25,000

Q: The table below shows the 12-month income statement for Beach Town Jetski Rentals. The company has not yet reached its break-even point. What is the contribution margin for each Jet Ski rental?

Beach Town Jetski Rentals
Income Statement for the period January 1, 2015 - December 31, 2015
Sales ($325 x 500 daily rentals) | $162,500
- Variable Cost Per Rental ($64 gas and parts) | ($32,000)
Gross profit | $130,500
Operating expenses |
- Salaries | ($75,000)
- Rent and equipment | ($186,000)
Total Operating Expenses | ($261,000)
Net Income (profit or loss) | ($130,500)
- $325
- $389
- $261
A: $261

Q: The table below shows the 12-month income statement for Beach Town Jetski Rentals. The company has not yet reached its break-even point. How many daily jet ski rentals does the team need to break even?

Beach Town Jetski Rentals
Income Statement for the period January 1, 2015 - December 31, 2015
Sales ($325 x 500 daily rentals) | $162,500
- Variable Cost Per Rental ($64 gas and parts) | ($32,000)
Gross profit | $130,500
Operating expenses |
- Salaries | ($75,000)
- Rent and equipment | ($186,000)
Total Operating Expenses | ($261,000)
Net Income (profit or loss) | ($130,500)
- 10,000
- 261
- 1,000
A: 1,000