Break-even Flashcards
1
Q
What is break-even?
A
when revenue from sales of products covers total costs
2
Q
Use of break-even
A
Decide if a business idea is profitable
Identify level of output and sales needed to make profit
Help decide scale of business
Assess effects of cost/price decisions
3
Q
Break-even equation
A
Fixed cost/contribution per unit
4
Q
Contribution equation
A
variable cost of one unit - selling price
5
Q
Should margin of safety be high or low
A
it should be high
6
Q
What is margin of safety
A
difference between break-even point and level of output
7
Q
Pros of break-even analysis
A
See impact of price/cost/demand on profit
Simple
Help make decisions (in HR/OP/MARKETING)
