12 - Using Break-even Analysis To Make Decisions

Question 0

Contribution per unit

Answer 0

This is the difference between the selling price of one unit and the variable cost of producing one unit

Question 1

Contribution

Answer 1

This is the difference between sales revenue and variable costs per unit

Question 2

Total contribution

Answer 2

Unit contribution x no. of units sold

Question 3

Break-even level of output

Answer 3

This is the level of output or the number of customers that earns enough revenue to cover total costs of production.

Question 4

Margin of safety

Answer 4

This is the amount by which the existing level of output is greater than the break-even point.