5.5 Break-even Flashcards
1
Q
what is the break-even quantity
A
the quantity a business must sell to exactly cover its costs
total costs = total rev
2
Q
BEQ formula
A
FC/(P-VC)
or
FC/CPU
3
Q
Contribution per unit def and formula
A
profit made from selling each product
CPU = price - VC
if CPU is negative, every time they sell, they make a loss –> never break-even
4
Q
Margin of safety
A
the amount by which the actual output exceeds the break-even quantity
essentially the area between the curves from a given quantity to the break even. given quantity needs to be larger than break even quantity
