Break Even Analysis

Question 1

Break Even Analysis, 2 things they help determine in decision making

Answer 1

• The break even point (where revenue is equal to expenses)
• The minimum level of sales they need to achieve to break even

Question 2

What are the 3 main components of break even analysis?

Answer 2

Variable Costs
Fixed Costs
Revenue

Question 3

Contribution per unit formula and definition

Answer 3

Selling price per unit - Variable Cost per unit

How much the sale of a product contributes to paying off the fixed costs of a business

Question 4

Margin of safety is where on a break even analysis graph

Answer 4

The margin on the x-axis between break even output and the actual output

Question 5

Break Even Point Formula

Answer 5

Break even Output = Fixed Costs / Contribution per unit

Question 6

Margin of safety formula

Answer 6

Actual level of output - Break even output