Breakeven Flashcards
What are the formulae for break even point?
= contribution required to break even / contribution per unit
= total fixed costs / contribution per unit
What is the contribution ratio and what is the formula?
It is a measure of how much contribution is earned from each £1 of sales revenue
Contribution ratio = contribution per unit / sales price per unit x 100%
It can be used to calculate break even revenue
What is breakeven revenue?
Contribution required to break even / contribution ratio
= fixed costs / contribution ratio
What is the margin of safety?
It is the amount by which sales can fall below budgeted sales without a loss being incurred.
Margin of safety = budgeted sales - breakeven sales
What is the formula to work out the sales volume to achieve target profit?
Fixed costs + required profit / contribution per unit
What is a ‘key factor’?
It is a limiting factor
