Breakeven Flashcards
What is contribution?
the amount of money you have left after detucting variable costs from selling price which is then contributed towards fixed costs and then profit
Formula for contribution?
total sales - total variable price
Formula for contribution per unit?
(selling price - variable cost) per unit
Total contribution formula?
contribution per unit x number of units sold
How can you calculate profit using contribution ?
( total revenue - total unit cost ) - fixed costs
When is the breakeven point?
when total sales = total costs
What are the three ways to calculate breakeven?
- graph
- table
- formula
Breakeven formula?
fixed costs / contribution per unit
fixed costs / ( selling price - variable costs per unit)
What is the margin of safety?
differance between actual output and the breakeven point
How do you calculate gorss profit?
total revenue - cost of sales (vc)
how do you calculate gross profit margin?
gross proft / revenue x 100
How do you calculate operating profit ?
gross profit - expenses (fc)
How do calculate operating profit margin?
operating profit / revenue x 100
What fixed costs could change ?
- rent goes up
- bank changed interest rate
- management want pay increase
What variable costs could change?
- raw materials change in price
- minimum wage is increased
- utility companies change price
