BREAK EVEN - CALCULATION Flashcards
1
Q
What is break even output
A
Break even output = The number of units a business needs to sell, so that it makes neither a profit nor a loss
2
Q
How to calculate break even output
A
Total revenue (TR) = Total costs (TC)
3
Q
What is break even important
A
Analyse if a business is viable
Helps set sales targets
Helps to gain investment
Helps to set a selling price
Allows for testing of assumptions (i.e. Impact of increased raw material costs)
4
Q
What is the formula for break even
A
Fixed costs divided by contribution per unit
5
Q
What is contribution per unit
A
Contribution per unit = Selling price - variable cost per unit
