Break-even Flashcards
1
Q
Define break-even.
A
The point where total costs and total revenue are equal.
2
Q
State key words linked with break-even.
A
- Fixed costs.
- Variable costs.
- Selling price.
3
Q
Whats the formula for break-even?
A
Fixed costs
————————————
Selling price - Variable cost
4
Q
Whats the formula for contribution?
A
Selling price - variable cost
5
Q
Whats the formula for margin of safety?
A
Current sales level - Breakeven point
——————————————— x100
Current sales level
6
Q
What are the limitations of break-even?
A
- Assumes a business will sell all of the stock at the same price.
- Businesses can be unrealistic in their calculations.
- They can be time consuming to create.
