3.5.2.5 Analysing Financial Performance: Calculating and Illustrating the Effects of Changes in Price, Cost and Output on a Break Even Chart. Flashcards
1
Q
What is the formula for profit?
A
Total revenue - total costs.
2
Q
How do we calculate profit on a break even chart?
A
Read off the TR and TC figures for the actual level of output.
3
Q
What are the possible changes that can occur to a break even chart?
A
An increase in the selling price, variable cost per unit or fixed costs.
A decrease in the selling price, variable cost per unit or fixed costs.
4
Q
What other type of analysis does break even analysis allow a firm to use?
A
What if analysis, to show the different break even outputs and changes in levels of profit from the possible changes.
5
Q
What is affected as output changes? How so?
A
TR changes in direct proportion.
TVC change in direct proportion.
Fixed costs stay the same.
