BS5- Break Evem Analysis

Question 1

What is break-even analysis?

Answer 1

the level of production at which the costs of production equal the revenues for a product.

Question 2

What data is needed to work out the break-even point?

Answer 2

Fixed costs / contribution margin

Question 3

How do you calculate contribution per unit?

Answer 3

Selling price per unit – Variable cost per unit

Question 4

What is the formula for calculating break even using contribution per unit?

Answer 4

Break-Even point (units) = Fixed Costs ÷ (Sales price per unit – Variable costs per unit)

Question 5

What is the margin of safety?

Answer 5

Margin of safety is the difference between the intrinsic value of a stock and its market price.

Question 6

What are the strengths of break even?

Answer 6

When you it break even everything after that is profit so it is a good target to have so that the company doesn’t lose money

Question 7

What are the limitations of breakeven?

Answer 7

break-even assumes a business will sell all of the stock (of a particular product) at the same price.