Break Even

Question 1

Revenue is

Answer 1

All money business makes from sales
Selling price ×quality sold.

Question 2

Costs is

Answer 2

All money spent on starting up business
Fixed variable semi variable direct indirect

Question 3

Profit is

Answer 3

Money business leaves over from revenue after all costs paid for

Question 4

Break even is

Answer 4

When tot costs exactly = to total sales

Question 5

Total contribution formular

Answer 5

Selling price - variable costs per item.

Question 6

Break even formular

Answer 6

fixed costs
÷
Selling price - variable costs (comtribution)

Question 7

Pros of break even

Answer 7

Forecast and budget and see constant Fixed costs
What I analysis -judgets impact of profitability
Provide simple ez analysis representation of costs
Calc how n.o sales that could be lost before business makes loss(margin of safety)

Question 8

Cons of break even

Answer 8

Simplistic not realistic
Assumes only product produced /sold ,rarely repeated in real world
Don’t consider external factors
Assumes all goods are sold at same £