Breakeven & Breakeven Point

Question 1

What is Breakeven?

Answer 1

Breakeven is the point at which a business has made neither a profit nor a loss.
When the Revenue and Expenditure are the same.

Question 2

What is the improtance of Breakeven Analysis?

Answer 2

Breakeven analysis is a tool used to determine when a business will be able to cover all its expenses and begin to make a profit.

Question 3

What is Margin of Safety?

Answer 3

The excess units produced beyond the breakeven point.

Question 4

What is the formula to calculate the Breakeven point?

Answer 4

Breakeven = Fixed costs / Selling price per units - Variable costs per unit

Question 5

What is the importance of Breakeven for all businesses?

Answer 5

It identifies how many products they will need to sell to cover all business expenditure.

Question 6

What if the business is not making suffient revenue to pay its bills?

Answer 6

The business will need to look at making changes or it will go into debt and maybe even have to close.

Question 7

What is used to produce Breakeven chart?

Answer 7

Fixed costs

Variable costs and Revenue