Break Even Flashcards
1
Q
Break even =
A
fixed costs/contribution per unit
2
Q
Contribution per unit =
A
Selling Price - VC per unit
3
Q
Total contribution =
A
Contribution per unit x No. of units
4
Q
Profit =
A
contribution - Fixed costs
5
Q
Margin of safety =
A
Actual output - BE output
6
Q
Expected value =
A
Probability x Outcome
7
Q
Net gain =
A
EV - Initial cost
8
Q
Value added =
A
Selling price - Raw material cost
9
Q
Strengths of breakeven:
A
Focuses on what output is needed before the business reaches profitability.
Investors and banks can see your break even calculations.
Helps management and finance.
Provides better understanding of risk
10
Q
Weaknesses of breakeven:
A
Based around assumptions.
Predictions will change.
Most sell more than one product (be only does one at a time)
Sales unlikely to be the same as output
