Break even analysis Flashcards
(8 cards)
1
Q
What is break even?
A
When a business’s total revenue equals its total costs.
2
Q
What is contribution?
A
The difference between the selling price of a product and its variable costs.
3
Q
What is the formula for contribution?
A
Selling price per unit - variable costs per unit
4
Q
What are the formulas for TOTAL contribution?
A
Total revenue - total variable costs
Contribution per unit x no. of units sold
5
Q
What is the formula for break even?
A
Fixed costs / contribution per unit
6
Q
What is the formula for margin of safety?
A
Actual output - break even output
7
Q
What are advantages of break even analysis?
A
Quick and easy
Helps persuade venture capitalists
8
Q
What are disadvantages of break even analysis?
A
Only simple for a single product
Assumes all products are sold without any wastage
