Breakeven Flashcards
1
Q
What are fixed costs?
A
These are costs which do not change or depend on anything
- Rent
- Salaries
- Insurance
2
Q
Variable costs
A
These are costs which can change depending on level of output.
- Wages
- Deliveries
- Raw materials
3
Q
Break even formula
A
Fixed costs/contribution (sp-vc)
4
Q
Breakeven
A
The point at which revenue equals costs so your business is neither making a profit or a loss
5
Q
Margin of safety
A
Difference between the breakeven point and the current level of output
6
Q
Limitations of breakeven
A
- Costs may increase
- Assumes every item is sold
- Assumes only one product is being sold
