Break-even point can be determined using the

• formula approach by solving the following for¬ mulas for X.

>- X — Fixed Cost •= Contribution Margin; where X = BEP in units

>- X = Fixed Cost A- Contribution Margin Ra¬ tio; where X = BEP in sales dollars

• graph approach

>- by reading the y-axis at the point where the total revenue and total cost lines intersect us¬ ing the traditional cost-volume-profit graph.

>- by reading where the profit line intersects the x-axis using the profit-volume graph.

• income statement approach which

>- requires developing complete income state¬ ments showing total revenue minus total costs as being equal to a profit figure.

>■ is often used to prove the solutions found with other approaches.

 LO.1