Lecture 9b

Question 1

How do you calculate variable cost per unit of output?

Answer 1

change in cost/ changes in units of output

Question 2

How to calculate breakeven output?

Answer 2

total fixed costs/ selling price per unit-variable cost per unit

Question 3

What is the break-even point?

Answer 3

The Break-Even Point (BEP) is the level of sales or output at which total revenue equals total costs — meaning:

📌 No profit, no loss.
At this point, all your fixed and variable costs are covered, but you haven’t made any extra profit yet.

Question 4

What are some limitations of break-even analysis?

Answer 4

1. No closing inventory
2. Consistent selling price
3. Consistent input prices
4. A single product firm

Question 5

What is contribution?

Answer 5

Is the difference between selling price of a product and the variable costs incurred in producing that product

Question 6

How do you calculate contribution per unit?

Answer 6

Selling price per unit- Variable cost per unit

Question 7

What is the margin of safety?

Answer 7

the difference between break-even point and the anticipated level of output

Question 8

How do you calculate margin of safety?

Answer 8

expected sales- break even point