Explanation should include the formula used in a sales-based business to analyze whether an expenditure will result in a profit. The break-even point is reached when sales and costs are equal. The break-even formula may be expressed as

BP = FC / VCM

or break-even point (BP) is equal to the fixed cost (FC) divided by the variable cost margin (VCM). VCM is equal to the unit price minus the variable cost per unit.

Process/Skill Questions: