Using Break-even Analysis To Make Decisions

Question 0

Break-even output

Answer 0

Level of output at which total sales revenue is equal to total costs of production

Question 1

Total contribution

Answer 1

Difference between sales revenue and total variable revenue

Question 2

Break-even analysis

Answer 2

Study of the relationship between total costs and total revenue

Question 3

Advantages of break-even analysis

Answer 3

• new firms can calculate how long it will take to reach the level of output needed to make a profit
• can predict profit level
• calculations are easy and quick

Question 4

Disadvantages of break-even analysis

Answer 4

• unreliable info
• selling price may change as more products are sold.
• ignores factors such as buying in bulk.