5.5 - Break-Even Analysis Flashcards
what is break-even quantity
the quantity of products a business must sell for the revenue to cover costs and to begin creating profits for the business
what is the equation for break even point
break even point = fixed costs/(price-variable costs)
what is contribution per unit and how is it calculated
CPU = (revenue - variable cost per unit)
the profit retained from the sale of each item
what is total contribution and what is the calculation
(contribution per unit) x (quantity sold)
the total profits made on each individual product from the total sales
what is margin of safety and how is it calculated
the total amount of stock a business holds after the break-even quantity
MOS = maximum output - output at the breakeven point
what is target profit output
It is used in break-even analysis to plan how many units a business needs to sell to reach a financial goal
what is target profit output calcualtion
(fixed costs + target profit)/CPU
what is target price (Break-even Analysis)
the price at which a business aims to sell their products
