Break-even analysis

Question 1

Amortization -

Answer 1

is a cost associated with the falling in value of certain types of assets

Question 2

Break-even point =

Answer 2

Fixed cost / (Selling price - Variable cost per unit)

Question 3

Margin of safety -

Answer 3

amount of output available to be sold above the break-even point where the business makes a profit

Question 4

The limitations of a break-even chart -

Answer 4

• TC and TR are showed as straight lines, in practice, they may not be straight lines
• It is assumed that all output is sold and no stocks are held
• The accuracy of the chart depends on the quality of the data used to construct TC and TR

Question 5

Bulk buying -

Answer 5

buying goods in large quantities, which is usually cheaper than buying in small quantities

Question 6

Stockpile -

Answer 6

large supply of goods and so forth are being kept for use or possible use in the future