Break-even Flashcards
What is Break-even?
The point at which the business does not make a profit or a loss.
Total Revenue=Total Costs
What are Fixed Costs?
Costs which do not change as production/output changes.
What are Variable Costs?
Costs which vary directly as production/outputs changes.
What is Total Revenue?
Total sales made from selling products/services.
What are the advantages of Break-even analysis?
You can see at a glance how many units need to be sold before a profit starts to be made.
Can see how much profit or loss is being made at different levels of output.
It can aid decision making, such as whether to change the selling price.
What are the disadvantages of Break-even analysis?
Difficult to use if the business makes more than one product.
It assumes that all units produced are sold.
Doesn’t take sudden increases in wages or prices into consideration.
