31 Break Even

Question 1

Define margin of safety

Answer 1

margin of safety is the difference between the break even point and the current level of sales.

Question 2

Define break even point and how to calculate it

Answer 2

break even is a point when the business does production but has no profit and no loss.

(fixed costs/selling price) - variable costs

Question 3

Define contribution

Answer 3

contribution is the amount of money left over after variable costs have been subtracted from revenue.

Question 4

Define break even output

Answer 4

break even ouput is the output a business needs to produce so that its total revenue and total costs are the same.