ACCA Performance Management (F5) Certification Practice Exam

How do you calculate the breakeven point in sales revenue?

1. Fixed cost / Contribution per unit

2. Fixed cost / C/S ratio

3. Contribution / Fixed cost

4. Sales price / Variable cost

The correct answer is: Fixed cost / C/S ratio

To calculate the breakeven point in sales revenue, the correct approach involves understanding the relationship between fixed costs, the contribution margin, and sales revenue. The breakeven point in sales revenue can be determined using the formula known as the contribution-to-sales ratio (C/S ratio). This ratio represents the portion of each sales dollar that contributes to covering fixed costs after covering variable costs. The formula used is: Breakeven Sales Revenue = Fixed Costs / C/S Ratio This formula indicates that you divide the total fixed costs by the contribution-to-sales ratio to arrive at the amount of sales revenue required to cover all fixed costs. This approach is integral because fixed costs are constant and need to be fully offset by sales revenue for the business to break even. In contrast, calculating breakeven using fixed costs per contribution per unit focuses on unit sales rather than revenue. While it can provide valuable insights regarding the number of units that need to be sold to break even, it doesn't directly yield the sales revenue figure, which is the primary goal of this question. Other options like the contribution to fixed cost ratio or calculations involving sales price and variable costs don't provide a direct method for calculating the breakeven point in terms of sales revenue. Hence, utilizing the fixed