Break-Even, Profit, Loss etc. Flashcards
What is Sales revenue?
Income from selling goods & services over a period of time.
What are Fixed costs?
Costs that stay the same no matter how much is sold.
+Eg. rent, salary
What are Variable costs?
Changes depending on how much is sold eg. raw materials, packaging
What is Total cost?
fixed costs & variable costs set over a period of time.
What is Break even?
When neither a profit or loss is made
+ Total revenue = total cost
What is the Break even point?
The number of items/ units needed to cover total cost
What is a Break even chart?
A graph showing a company’s revenue and total costs at all possible level of output
What is Profit?
Difference between total revenue and total cost.
+If the figure is negative the business is making a loss
What is the Margin of safety?
Difference between what is actually sold and the break even sales point
What is the equation for revenue?
Selling Price x quantity sold
[SPxQ]
What is the equation for Total cost?
Fixed cost + Variable cost
[FC + VC]
What is the equation for Profit?
Total revenue - Total cost
[TR - TC]
What is the equation for Break-even output?
Fixed cost/Sales Price - variable cost per unit
[FC/SP - VC(pu)]
What is the equation for Margin of safety?
Current sales - break-even sales
How do you work out the variable cost on a graph?
Variable cost x quantity sold
How do you work out the total cost on a graph?
[Variable cost x quantity] + Fixed cost
How do you work out the total revenue cost on a graph?
Sales Price x Quantity
What are the advantages of a break-even chart?
\+Helps set realistic targets \+Helps raise money from banks \+Provides good evaluation to assess if you are on target \+Helps make pricing decisions \+Helps identify how to cover costs
What are the disadvantages of a break-even chart?
+Only analyses one product
+If firms sell at different prices break-even constantly changes
+Doesn’t account for build up of stock or waste
+Does’t account the sell by date
