break even real

Question 1

what is break even and equation?

Answer 1

it is the point at which total revenue equals total costs

total fixed costs/contribution per unit

Question 2

total contribution formula

Answer 2

contribution per unit X number of units sold
or
total revenue - total variable costs

Question 3

contribution per unit formula

Answer 3

selling price - variable cost per unit
or
total contribution/number of units sold

Question 4

what is contribution?

Answer 4

the difference between the selling price and how much it costs to make the item

Question 5

extra break even

Answer 5

• revenue generated from sales will cover total costs
• expressed as an amount of output, not monetary value
• minimum number of products that need to be sold to cover costs

Question 6

benefits of break-even

Answer 6

-a useful guideline to help businesses make decisions
- simple and easy to use
- can be used to analyse the impact of varying customers, prices and costs on a business’s profit

Question 7

limitations of break-even analysis

Answer 7

• fixed costs may be shared across a portfolio of products
• assumes variable costs are constant = costs can come down – growth = eos = costs decrease
• only a snapshot
• most sell more than one product = harder to calculate
• ## selling price per prodyc may change = discount to get rid of

Question 8

what is margin of safety and formula?

Answer 8

• shows a business how much output can reduce/fall before reaching the break even point

actual output - break even output