Break Even Flashcards
1
Q
Break Even
A
The point at which total costs and total revenue are equal at this point the business is not making a loss or a profit.
2
Q
Why Would a Business Want To Know Their Break Even Point?
A
- Analyse costs.
- Impact of revenue.
- Sets a goal to aim to achieve in order to survive.
- Make accurate pricing decisions.
- See if you are on track.
- Motivation.
- Good for new businesses, shows them where they are.
3
Q
Contribution
A
The amount of revenue going towards “contributing” to cover the costs and make profit.
4
Q
Total Contribution
A
The difference between total revenue and total costs.
Total Contribution = Total Revenue - Total Variable Costs
5
Q
Unit Contribution
A
Unit Contribution = Selling Price - Variable Cost Per Unit
