break even

Question 1

define break even

Answer 1

number of units or customers a business needs to sell so the revenue matches the costs

Question 2

break even equation

Answer 2

fixed costs / selling price per unit - variable costs per unit (contribution margin per unit)

Question 3

use of break even in business plan

Answer 3

it will show whether business will make a loss, break even or make a profit

if the break even point is higher than predicted sales then business can make key decisions to change this or show why it make a loss in short term and then a profit long term to potential investors.

Question 4

things that affect break even point

Answer 4

• extra cash spent on launch advertising increases it
• planned price increase decreases breakeven point
• buying new machinery would increase it