Business - Breakeven analysis Flashcards
when does a business break even ?
A business breaks even when the level of output just covers its costs. The business does not make a profit or a loss
when does the breakeven point of a business occur ?
The breakeven point occurs when total costs are equal to total revenue.
what is the formula for break even point ?
Breakeven point : Total costs = Total revenue
how can the break even point of a business be found
- Looking at the cost and revenue table
- drawing a breakeven chart
- using the breakeven formula
what is a breakeven chart
A breakeven chart is a chart from plotting cost and revenue information on a graph
where is the output plotted on a breakeven graph
On the x- horizontal axis
where is the costs and revenue plotted on a breakeven graph
On the y - vertical axis
what does the fixed cost line mean on a breakeven graph and where is it plotted ?
The fixed cost line is a horizontal straight line as fixed costs do not change with output.
what does The total cost line mean on a breakeven graph and where is it plotted ?
The total cost line is at the start of the fixed cost level and rises with output
what does the The total revenue line mean on a breakeven graph and where is it plotted ?
The total revenue line will start from 0 and will then slope upwards from left to right.
where can the breakeven quantity be found on a breakeven graph ?
The breakeven quantity can be found by reading down to the output axis.
where can the breakeven level of sales revenue be found on a breakeven graph ?
The breakeven sale of revenue can be found by reading across to the costs and revenue axis.
