Using Break-even Analysis To Make Decisions Flashcards Preview

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Flashcards in Using Break-even Analysis To Make Decisions Deck (5):
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Total contribution

Difference between sales revenue and total variable revenue

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Break-even output

Level of output at which total sales revenue is equal to total costs of production

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Break-even analysis

Study of the relationship between total costs and total revenue

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Advantages of break-even analysis

-new firms can calculate how long it will take to reach the level of output needed to make a profit
-can predict profit level
-calculations are easy and quick

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Disadvantages of break-even analysis

-unreliable info
-selling price may change as more products are sold.
-ignores factors such as buying in bulk.