Week 7- Breakeven Analysis

Question 1

what is breakeven analysis?

Answer 1

The process of finding out whether a product is profitable or not

Question 2

What are the four types of breakeven analysis?

Answer 2

Single product case
Multi product case
Make vs Buy decisions
Capacity expansion decisions

Question 3

what is contribution?

Answer 3

The difference between the selling price of the good or service and its variable cost. Calculated by selling price * - Variable cost (* number of goods sold = total contribution)

Question 4

Total contribution - total Fixed costs =

Answer 4

Profit

Question 5

what is the profit corridor?

Answer 5

The area between total revenue and total cost line to the right of breakeven point

Question 6

what is the loss corridor

Answer 6

the area between revenue and total cost line to left of breake even point.

Question 7

what is the break even point?

Answer 7

where total revenue = total costs

Question 8

how do you work out the break even point for make vs buy scenarios?

Answer 8

Break even point = Fixed cost to buy- Fixed cost to make /Variable cost to make -Variable cost to buy

Question 9

what is the method for working out multi product case break even ?

Answer 9

1) Calculate the revenue for each product and add together
2) Calculate the contribution for each product (sales price - variable cost /unit)
3) Calculate the total contribution for each product ( contribution x quantity of goods sold) and add together
4) Revenue break-even point= Fixed cost x(total revenue/total contribution)
5) Profit = total contribution - fixed costs

Question 10

How do you claculate the revenue to breakeven?

Answer 10

Fixed cost x (Total revenue/Total contribution)

Question 11

how do you calculate break even quantity for each product in multiple product case scenarios?

Answer 11

(Fixed cost x Sales Quantity) / Total contribution