31. Break Even

Question 1

Unit contribution =

Answer 1

selling price - variable cost

Question 2

Total contribution =

Answer 2

total revenue - total variable cost

Question 3

total contribution (multiplication) =

Answer 3

Unit contribution x nr of products sold

Question 4

break even output =

Answer 4

fixed costs / contribution

Question 5

Limitations of break even analysis:

Answer 5

• Output and stocks
• Unchanging conditions
• Accuracy of data
• Non-linear relationships
• Multi-product businesses
• Stepped fixed costs

Question 6

break-even

Answer 6

when a business generates just enough revenue to cover its total costs

Question 7

break-even chart

Answer 7

a graph containing the total cost and total revenue lines, illustrating the break-even output

Question 8

break-even output

Answer 8

the output a business needs to produce so that its total revenue and total costs are the same

Question 9

break-even point

Answer 9

the point at which total revenue and total costs are the same

Question 10

contribution

Answer 10

the amount of money let over after variable costs have been subtracted from revenue. The money contributes towards fixed costs and profit.

Question 11

margin of safety

Answer 11

the range of output between the break-even level and the current level of output, over which a profit is made