Break Even Flashcards
Break-even analysis
The point at which a business is not making a profit or loss. The money received from sales is the same as the money being spent on costs
Margin of Safety
The margin of safety is the amount sales can fall before they break even. Point (BEP) is reached and the business makes no profit. This calculation also tells a business how many sales it has made over its BEP.
Contribution
Looks at the profit made on individual products
Total Revenue Formula
Selling Price * Quantity Sold
Total Costs Formula
Total Fixed Costs + Total Variable Costs
Profit Formula
Total Revenue - Total Costs
Total Contribution Formula
Sales Revenue - Total Variable Costs
Contribution (per unit) Formula
Selling Price - Variable Cost (per unit)
Profit (using contribution) Formula
Contribution per unit * Margin of Safety
Break Even Output
Total Fixed Costs/Unit Contribution
Margin of Safety Formula
Actual Sales - Break Even Level of Output
Sales Revenue Formula
Unit Price * Quantity Sold
