Break even(2.2.3) Flashcards
1
Q
What is contribution?
A
refers to a products selling price minus the variable costs directly involved in producing that unit
2
Q
Contribution equation
A
contribution = selling price per unit - variable cost per unit
3
Q
What is break even?
A
when the total revenue earned for a product is equal to its cost
the business is making neither a profit or a loss
expressed in number of units
4
Q
Break even equation
A
BE point = fixed costs / contribution
5
Q
What is margin of safety?
A
the difference between the actual level of output of a business and its break even level of output
6
Q
Margin of safety equation
A
margin of safety = actual level of output - break even level of output
7
Q
Break even chart
A
