1
Q
what’s break even point
A
the point where total revenue is equivalent to total costs
2
Q
how do you calculate contribution
A
selling price - variable costs
3
Q
how to calculate total contribution
A
contribution per unit x number sold
4
Q
how to calculate break even
A
total costs / contribution
5
Q
how to calculate margin of safety
A
actual sales - break even
6
Q
uses of break even
A
- can be used as a planning tool
- can see how many products need to be sold to break even
- help to set sales targets
7
Q
limitations of break even analysis
A
- often too simplistic and assumptions are unrealistic
- effectiveness depends on quality of accuracy
- doesn’t take into account external influences
8
Q
advantages of break even
A
- quick and simple
- easy to interpret
- help spot problems
- can assist in applying for a loan
9
Q
disadvantages of break even
A
- its only a forecast
- assumes all products are made and sold
- costs may change
BUSINESS THEME 2 (PAPER 2)
flashcards
Decks in class (25)
# Cards
-
THEME 2 FORMULAS20
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2.1.1/2 INTERNAL/EXTERNAL FINANCE41
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2.1.3 LIABILITY8
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2.1.4 PLANNING5
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2.1.5 CASH FLOW FORECASTS4
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2.2.1 SALES FORECASTING6
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2.2.2 SALES, REVENUE AND PROFIT5
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2.2.3 BREAK EVEN9
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2.2.4 VARIANCE ANALYSIS / BUDGETING22
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2.3.1 PROFIT17
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2.3.2 LIQUIDITY21
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2.3.3 BUSINESS FAILURE5
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2.3 FORMULAS9
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2.4.1 PRODUCTION12
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2.4.1 PRODUCTIVITY AND EFFICIENCY8
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2.4.2 CAPACITY UTILIZATION10
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2.4.3 STOCK CONTROL14
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2.4.4 QUALITY MANAGEMENT17
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2.5.1 ECONOMIC INFLUENCES (INFLATION)9
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2.5.1 ECONOMIC INFLUENCES (EXCHANGE RATES)7
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2.5.1 ECONOMIC INFLUENCES (GOV SPEND AND TAX)8
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2.5.1 ECONOMIC INFLUENCES (BUSINESS CYCLE)7
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2.5.1 ECONOMIC INFLUENCES (INTEREST RATES)12
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2.5.2 LEGISLATION10
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2.5.3 THE COMPETITIVE ENVIRONMENT0
