How is the break-even point (BEP) calculated?

The break-even point (BEP) represents the level of sales at which total revenues equal total costs, resulting in no profit or loss. The correct calculation of the BEP involves understanding the relationship between fixed costs, variable costs, and the selling price per unit.

To calculate the break-even point, the formula used is:

[ \text{BEP (in units)} = \frac{\text{Fixed Costs}}{\text{Selling Price per Unit} - \text{Variable Cost per Unit}} ]

In the context of the choices provided, while the answer indicating "Fixed costs plus variable costs" appears tempting, it does not accurately capture the mechanism by which BEP is calculated.

The correct formulation recognizes that BEP is fundamentally about how fixed costs are covered by the contribution margin (selling price minus variable costs). Thus, the relationship between fixed costs and variable costs is crucial, but the specifics should account for the revenue generated from sales rather than simply summing costs.

Given the options provided, it's important to focus on a deeper understanding and correct application of the break-even analysis considering fixed and variable costs along with selling prices to find the correct BEP.