2.2.3 break even Flashcards

1
Q

break-even

A

point at which revenue equals cost so your business is making neither a profit nor a loss

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2
Q

contribution formula

A

selling price per item - variable cost per item

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3
Q

contribution to calculate profit formula

A

contribution per unit x sales quantity
total contribution - fixed costs

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4
Q

break even formula

A

fixed costs / contribution

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5
Q

margin of safety

A

difference between the break-even point and the current level of output

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6
Q

margin of safety formula

A

production - breakeven

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7
Q

limitations of break even

A

costs may increase
assumes every item is sold
only a best guess of what may happen

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