23) Break Even

Question 1

Fixed cost

Answer 1

Do not change
No matter how many units produced or sold

Rent
Insurance

Question 2

Variable costs

Answer 2

Do change
Depending on how many units are produced or sold

Raw materials
Electricity

Question 3

Total costs

Answer 3

Fixed costs and variable costs added together

Question 4

What is a break even Chart?

Answer 4

When the break even analysis is shown in the form of a chart
There are three lines to represent total revenue (income before deductions), total cost (fixed cost add variable cost), fixed cost

Question 5

Advantages of break even analysis

Answer 5

Calculate break even point
Estimate profit or loss
Find level of output or number of sales for the desired profit

Question 6

Disadvantages of break even analysis

Answer 6

Only works for one product
Selling prices can change making facts unreliable
Some costs can’t be classes as fixed or variable

Question 7

What is the purpose of the break even analysis?

Answer 7

It helps to predict:
if making and selling a product will be profitable
How many units have to be sold before profit is made
What will the profit be at various levels of output