What is the formula used to determine the break-even point for an electrician with fixed costs?

The formula used to determine the break-even point is indeed fixed costs divided by the difference between the average price charged per unit and the variable cost per unit. This method allows an electrician, or any business, to assess how many units (in this case, repairs) they need to sell to cover all their fixed costs without making a profit or loss.

Fixed costs are those expenses that do not change with the level of output, such as rent, insurance, and salaries. Variable costs are expenses that fluctuate with the level of output, like materials and labor that vary per job. The average price represents what the electrician charges customers for their services.

When you subtract variable costs from the average price, you obtain the contribution margin, which reflects the amount of money each repair contributes to fixed costs. By dividing the total fixed costs by this contribution margin, the electrician determines the minimum number of repairs needed to break even. This is crucial for managing finances and understanding when the business will become profitable.

Other options do not correctly represent the break-even analysis. For example, simply adding fixed and variable costs does not yield a useful figure for understanding break-even points, nor does calculating total revenue minus total costs provide a specific figure for the point of zero profit or loss