Break-Even Analysis Flashcards
1
Q
What does break even mean?
A
Covering your costs
2
Q
What is the Break-Even level of output?
A
Is the level of sales a firm needs to cover its costs
3
Q
How to calculate break-even point in units?
A
Sales price - variable cost
4
Q
How to calculate Break-even point for revenue?
A
Break-Even point in units x sales price
5
Q
Why is a low Break-even point good for the business?
A
It won’t have to sell as much to make a profit
6
Q
What is the Margin of safety of a firm?
A
The gap between the current level of output and the break-even output
7
Q
What is the equation of margin of safety?
A
Actual sales - Break Even sales
