break-even output

Question 1

what is break-even

Answer 1

the number of sales a business needs to make in order to cover its costs

Question 2

why is it important for a firm to find their break-even output

Answer 2

-banks will ask to see a business’s break-even output as a part of the firms business plan
-helps a new business see how many sales they need to make in order to make a profit

Question 3

what is the equasion to find break even

Answer 3

fixed costs / contribution per unit

Question 4

how do you find contribution per unit

Answer 4

selling price per unit - variable cost per unit

Question 5

what two lines cross on a break even chart to show the break-even output

Answer 5

the line of revenue and the line of total cost

Question 6

what is the margin of safty

Answer 6

margin of safty is the difference between a firms actual output and their break-even output

Question 7

how does you find margin of safty

Answer 7

margin of safty = actual out - break even output