break even

Question 1

definition of break even?

Answer 1

• break even is the point at which the business does not make a profit or a loss

total revenue = total cost

Question 2

how is the total cost calculated?

Answer 2

total costs is calculated by adding fixed costs to variable costs

Question 3

definition of fixed costs?

Answer 3

• costs which do not change as production/output changed

Question 4

definitoon of variable costs?

Answer 4

• costs which vary directly as production/output changes

Question 5

definition of total revenue?

Answer 5

• total sales made from selling products/services

revenue= selling price x number of units sold

Question 6

what is a break even table?

Answer 6

• a break even table can be used to calculate the break even point. it is also useful for showing the level of profit/loss at various levels of units

Question 7

what can be calculated from a break even chart?

Answer 7

• fixed costs
• variable unit costs
• total sales at a given number of units
  -selling price per unit
• profit/loss at a given number of units

Question 8

advantages of break - even analysis?

Answer 8

• you can see at a glance how many units need to be sold before a profit starts to be made
• can see how much profit or loss is being made at different levels of output
• it can aid decision making,such as whether to change the selling price

Question 9

disadvantages of break-even analysis?

Answer 9

• difficult to use if the business makes more than one product
• it assumes that all units produced are sold
  -doesnt take sudden increases in wages or prices into consideration

Question 10

how to calculate profit for the year?

Answer 10

gross profit - expenses

Question 11

how to calculate total revenue?

Answer 11

revenue = selling price x number of units sold

Question 12

how to calculate total costs?

Answer 12

fixed costs + variable costs

Question 13

how to calculate profit/loss?

Answer 13

total revenue-total costs