Break even | Theme 2 Flashcards
1
Q
What is contribution?
A
Looks at the profit made on individual products. Used to calculate how many items need to be sold to cover all business costs
2
Q
Contribution FORMULA
A
Contributuin = total sales - total variable costs
3
Q
Contribution per unit FORMULA
A
Contribution per unit = selling price per unit - variable cost per unit
4
Q
Total contribution FORMULA
A
Total contribution = total revenue - total variable costs
5
Q
Profit FORMULA
A
Profit = contribution - fixed costs
6
Q
Three methods of calculating break even using contribution
A
- A table
- A formula
- A graph
7
Q
What is the Margin of Safety?
A
The difference between the break even level of output and the actual level of output
8
Q
Break even FORMULA
A
Break even output = fixed costs / contribution per unit
