Break Evean Flashcards
(19 cards)
What is the definition of break even
When the business doesn’t make profit it doesn’t make any loss
What is the formula for break even
Fixed costs divided by selling price - variable cost
Formula for the contribution
Selling price - variable cost
What must u do if the breaker even is a decimal
Round up !!!
Sales revenue at break even formula
Break even quantity X selling price
To read the sales revenue at break even where must u read from
The y axis , vertical
Calculate the level of profit using a break even graph
Calculate the gap between the total revenue line and the total cost line .
Profit = total revenue - total cost
What line is always horizontal on the break even graph
Fixed costs
What is the margin of safety
The difference between the actual sales and the number of sales made at break even
Formula for margin of safety
Actual sales - break even output
What is the purpose of completing a break even analysis
So a business can plan how much to sell to break even
To see how much profit or loss a business will make in a given Leavel of output
To determine how a change in costs will affect the break even point
To determine how a chance in price will affect the break even point
What are the advantages of completing a break even analysis
To help a business spot problems and help to solve the problems
No specialist training is required to construct and anaylis then
What are the disadvantages
It assumes all products are sold at the same price
The chat is only a forecast
It is an estimation but actual data
What happened to break even point if the fixes costs increase
The break even pony increases as the total cost are higher and the business has to sell more
What happened to the break even point if gives costs decrease
The break even point decreases as the total cost are lower and the bussiness has to sell less
What happened to the break even point if variable costs increase
The break even point increases as the total costs are higher and the business has to sell more
I hat happened to the break even point if variable costs decrease
The break even point decreases as the total costs are lower and the business has to sell less
What happened to the the break even point if the selling prices increases
The break even point will decrease because increasing selling prices would mean you make more money per products sold and therefore more total revenue . This means that the business would have to sell less to break even
What happened to the break even point if the selling price decreases
The break even point will increase because the larger quantity of products would need to be sold as the money made per products sold would be smaller . This means that the business would have to sell more to break even
