break-even charts Flashcards
total revenue formula
quantity sold x average price
total cost formula
fixed costs + variable cost
breakeven formula
total costs/ (SP- VC)
contribution
is a price per item - variable cost per item
margin of safety
the margin of safety is the amount of output between the actual level of output where profit is being made and the break-even level of output. this is how production can fall before the business starts to make a loss.
why can businesses use break-even analysis
to answer ‘what if’ questions
setting and achieving production targets, launching a new product, starting a new business, developing a business plan.
how can you lower BEP
by increasing the price that the product/service is sold at but it does not necessarily mean that you will reach the point faster as the increased price could deter customers from buying from the business
