Unit - Finance - Break Even Graphs

Question 1

What is breakeven output?

Answer 1

The level of sales a business needs to cover its costs

Question 2

What is the formula for Contribution Per Unit?

Answer 2

CPU = selling price per unit - variable costs per unit

Question 3

What’s the formula for total contribution?

Answer 3

TC = Total rev - total variable costs
OR
TC = CPU x Units sold

Question 4

What is the formula for breakeven output?

Answer 4

B/even = fixed costs

              CPU              X 100

Question 5

What is margin of safety?

Answer 5

The amount between actual output and break even

Question 6

What is formula for margin of safety?

Answer 6

MOS = actual output - breakeven output

Question 7

What are advantages of breakeven analysis?

Answer 7

-Easy to do + quick
-Businesses can use break even analysis to help persuade a bank to give them a loan

Question 8

What are some disadvantages of breakeven analysis?

Answer 8

-if data is wrong results will be wrong
-only simple for a single product
-assumes variable always rise steadily
-assumes the business sets all the products