using break-even analysis in planning

Question 1

why does an enterprise use a break-even analysis?

Answer 1

they use it as a planning tool to enable them to consider the impact of different levels of output, sales and prices on the break-even point

Question 1

costs increase:
what happens when costs increases?

Answer 1

break-even point rises so the enterprise makes less profit

Question 2

costs increase:
what may an enterprise need to sell more of?

Answer 2

items to break-even

Question 3

costs increase:
what may an enterprise try to reduce?

Answer 3

costs

Question 4

costs increase:
what may an enterprise try to raise?

Answer 4

the selling point

Question 5

costs fall:
what happens when costs fall?

Answer 5

it lowers the break-even point which means the enterprise makes more profit

Question 6

costs fall:
what does it mean if the brew-even point is low?

Answer 6

means that the enterprise will have fewer sales to break-even

Question 7

increase in selling price:
what does this mean if there is an increase in selling price?

Answer 7

break-even point lowers which means fewer sales required to break-even

Question 8

decrease in selling price:
what happens when there is a decrease in selling price?

Answer 8

break-even point rises

Question 9

decrease in selling price:
what are the actions to take?

Answer 9

make more sales to break-even
reduce its variable costs

Question 10

sales increase:
as sales increase, what lowers?

Answer 10

the break-even point

Question 11

sales increase:
as sales increase, how does the enterprise make more profit?

Answer 11

because as the break-even point lowers, the margin of safety increases and revenue will increase

Question 12

sales fall:
as sales fall, what rises?

Answer 12

the break-even point

Question 13

sales fall:
what decreases as sales fall?

Answer 13

the margin of safety

Question 15

sales fall:
as an enterprise lowers the selling price what does this increase and reduce?

Answer 15

increases the number of goods needed to be sold to break- even.
It may also reduce its variable costs.

Question 16

what can a change in the selling price have the opposite effect to?

Answer 16

to the one hoped for by the enterprise - to lower the break-even point

Question 17

when increasing the sales, what will happen as customers may not be prepared to pay the increased price?

Answer 17

switch to a rival
cheaper brand

Question 18

when falling sales, why may an enterprise lower the price for a short time only?

Answer 18

to boost sales and attract new customers