2B

Question 1

What is contribution

Answer 1

The profit made on individual products

Question 2

total contribution =

Answer 2

total revenue - total variable costs

Question 3

Contribution per unit =

Answer 3

sp/unit - variable costs/unit

Question 4

profit =

Answer 4

total contribution - fixed costs

or
TR-TC

Question 5

Breakeven output =

Answer 5

FC/ contribution per unit

Question 6

what is the break even point

Answer 6

When total revenue=total costs

Question 7

Margin of safety=

Answer 7

Actual output- breakeven output

Question 8

Strengths of breakeven analysis

Answer 8

Focuses on what output is required before a business reaches probability.
Helps management and finance
Provides a better understanding of the risk of a business or idea
Calculations are quick and easy.
Margin of safety shows how much a sales forecast can prove over-optimistic

Question 9

limitations of break even analysis

Answer 9

unrealistic assumptions-products are not sold at the same price at different levels of output.
Sales are unlikely to be the same as output- there may be some build up of stocks and wasted output too.
Planning aid rather than a decision making tool.

Question 10

TR=

Answer 10

SP * QS

Question 11

TC=

Answer 11

FC + VC