Edexcel- Break even analysis Flashcards
1
Q
Break even point
A
The point at which a business makes no losses or profits.
2
Q
Break even point formula
A
Fixed costs/ Contribution
3
Q
Margin of safety
A
Difference between level of output and break even level of output.
4
Q
Margin of safety formula
A
Actual level of output- Break even level of output
5
Q
Break even chart
A
A visual representation of the break even point
6
Q
What does a break even chart identify?
A
Total costs
Revenue
Margin of safety.
7
Q
Limitations of break even analysis
A
Assumes all output is sold
Accuracy of break even analysis is reliant on quality of data.
Break even charts cannot be easily amended.
