Break Even Flashcards
1
Q
Breakeven
A
Breakeven is when total costs (fixed costs + variable costs) are exactly the same as the total revenue. This means that there is no extra loss or gain and the business is stable. 
2
Q
Breakeven Output
A
Breakeven output is the level of output businesses produce to breakeven.  Breakeven output = fixed costs/contribution Contribution = selling price - variable costs
3
Q
Breakeven Chart
A
4
Q
Margin of Safety
A
Is the margin of safety shows a business how much sales can fall before a loss occurs.
5
Q
Margin of Safety on a chart
A
6
Q
Advantages of Breakeven
A
Break even shows how much projects need to be sold in order to ensure profit.
It is quick and easy to analyse. 
7
Q
Disadvantages of Breakeven
A
It can be time-consuming as variable costs mean breakeven has to continuously be updated.
Businesses can overestimate themselves. 
