BREAK EVEN - CALCULATION

Question 1

What is break even output

Answer 1

Break even output = The number of units a business needs to sell, so that it makes neither a profit nor a loss

Question 2

How to calculate break even output

Answer 2

Total revenue (TR) = Total costs (TC)

Question 3

What is break even important

Answer 3

Analyse if a business is viable
Helps set sales targets
Helps to gain investment
Helps to set a selling price
Allows for testing of assumptions (i.e. Impact of increased raw material costs)

Question 4

What is the formula for break even

Answer 4

Fixed costs divided by contribution per unit

Question 5

What is contribution per unit

Answer 5

Contribution per unit = Selling price - variable cost per unit