Break even analysis

Question 1

What is break even output?

Answer 1

fixed costs / contribution

Question 2

What is contribution?

Answer 2

Selling price per unit - variable costs per unit

Question 3

What is the margin of safety

Answer 3

Actual output - break even output

Question 4

What are the benefits of a break even analysis?

Answer 4

Can be used to secure a loan
Easy to carry out for a single product

Question 5

What are the drawbacks of break even analysis?

Answer 5

Complicated for multiple products
Doesn’t factor demand