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Question 1

How can you calculate Break-Even?
(3 ways)

Answer 1

1. Using a table showing revenue and costs over a range of outputs
2. Using a formula to calculate the break even quantity
3. Using a graph that shows revenue and costs over a range of output levels.

Question 2

Benefits of Break-Even Analysis

Answer 2

1. Shows how many products a business needs to produce to Break-Even .
2. Shows how changes in cost impact revenue.
3. What-If analysis

Question 3

Problems with Break-Even Analysis

Answer 3

1. Assumes all output is sold.
2. Assumes selling price doesn’t change.
3. All analysis is based on predictions ( fixed costs stay the same, no EoS)

Question 4

Why are profits important?

Answer 4

1. They provide a measure of the success of a business
2. They provide funds for investment
3. Attract investment opportunities

Question 5

What is profit

Answer 5

a comparison between revenue and costs

Question 6

How do you calculate Gross profit and Operating profit.

Answer 6

GP = Sales Revenue - Cost of Sales
OP = GP - Overheads