Podcast
Questions and Answers
A company has fixed costs of £8000, a selling price of £20 per unit, and variable costs of £10 per unit. What is the break-even point in units?
A company has fixed costs of £8000, a selling price of £20 per unit, and variable costs of £10 per unit. What is the break-even point in units?
- 1200 units
- 400 units
- 600 units
- 800 units (correct)
A business calculates its break-even point to be 500 units. If they sell 650 units, what does the additional 150 units represent?
A business calculates its break-even point to be 500 units. If they sell 650 units, what does the additional 150 units represent?
- Fixed costs
- Net Loss
- Margin of safety (correct)
- Variable costs
What does the break-even point signify for a business?
What does the break-even point signify for a business?
- The level of output where total revenue exceeds total costs.
- The level of output where total costs exceed total revenue.
- The level of output where total costs equal total revenue. (correct)
- The optimal production level for maximizing profit.
If a company's break-even point is 200 units and they are currently selling 150 units, what action should they consider to reach profitability?
If a company's break-even point is 200 units and they are currently selling 150 units, what action should they consider to reach profitability?
Which of the following changes would decrease the break-even point?
Which of the following changes would decrease the break-even point?
What is the primary use of break-even analysis for a business?
What is the primary use of break-even analysis for a business?
A small bakery has fixed costs of £2,000 per month. Each cake sells for £25, and the variable costs to make a cake are £10. How many cakes must the bakery sell each month to break even?
A small bakery has fixed costs of £2,000 per month. Each cake sells for £25, and the variable costs to make a cake are £10. How many cakes must the bakery sell each month to break even?
If a business lowers its variable costs per unit, what is the likely impact on the break-even point, assuming all other factors remain constant?
If a business lowers its variable costs per unit, what is the likely impact on the break-even point, assuming all other factors remain constant?
A company's break-even point is significantly higher than its current sales volume. Which of the following strategies would be most effective in addressing this issue?
A company's break-even point is significantly higher than its current sales volume. Which of the following strategies would be most effective in addressing this issue?
A company is operating above its break-even point. What does this indicate about the company's financial status?
A company is operating above its break-even point. What does this indicate about the company's financial status?
What is the formula to calculate the break-even point in units?
What is the formula to calculate the break-even point in units?
Which of the following is an example of a fixed cost that would be included in break-even analysis?
Which of the following is an example of a fixed cost that would be included in break-even analysis?
A business has a break-even point of 1,000 units. If fixed costs increase but the selling price and variable costs remain constant, what will happen to the break-even point?
A business has a break-even point of 1,000 units. If fixed costs increase but the selling price and variable costs remain constant, what will happen to the break-even point?
A company sells a product for £50 per unit with variable costs of £30 per unit. If the company's fixed costs are £10,000, what is the break-even point in units?
A company sells a product for £50 per unit with variable costs of £30 per unit. If the company's fixed costs are £10,000, what is the break-even point in units?
Which of the following strategies would NOT help a business lower its break-even point?
Which of the following strategies would NOT help a business lower its break-even point?
How does a break-even chart visually represent the break-even point?
How does a break-even chart visually represent the break-even point?
Variable costs increase from £5 to £7 per unit, while fixed costs and selling price remain constant. What is the likely effect on the Break Even Point?
Variable costs increase from £5 to £7 per unit, while fixed costs and selling price remain constant. What is the likely effect on the Break Even Point?
A new business is deciding whether to invest in a marketing campaign. How could break-even analysis assist in making this decision?
A new business is deciding whether to invest in a marketing campaign. How could break-even analysis assist in making this decision?
A business has the following financials. Fixed Costs: £5000. Variable costs per unit: £5. Selling price per unit: £10. The business sells 750 units. What is the profit or loss?
A business has the following financials. Fixed Costs: £5000. Variable costs per unit: £5. Selling price per unit: £10. The business sells 750 units. What is the profit or loss?
Which of the following is a limitation of break-even analysis?
Which of the following is a limitation of break-even analysis?
Flashcards
Break-even Point (BEP)
Break-even Point (BEP)
The production level where total revenue equals total costs, resulting in neither profit nor loss.
Fixed Costs
Fixed Costs
Expenses that remain constant regardless of the level of production (e.g., rent).
Variable Costs
Variable Costs
Expenses that change directly with the level of production (e.g., raw materials).
Selling Price
Selling Price
Signup and view all the flashcards
Break-even Formula
Break-even Formula
Signup and view all the flashcards
Break-even Graph
Break-even Graph
Signup and view all the flashcards
Study Notes
Break-Even Point
- Break-even occurs when a business's revenue equals its total costs.
- At the break-even point (BEP), a business experiences neither profit nor loss.
- The break-even level of output indicates the quantity of products a business must sell to reach the BEP.
Break-Even Calculation
- The formula to calculate break-even is: Fixed Costs ÷ (Selling Price − Variable Costs)
- The result of the calculation represents the number of products a business needs to sell to break even.
- The calculation in the brackets (Selling Price − Variable Costs) must be completed first.
Example Calculation
- A T-shirt business has fixed costs of £400.
- Each T-shirt sells for £10.
- The variable cost per T-shirt is £6.
- Calculation: £400 ÷ (£10 − £6) = £400 ÷ £4 = 100
- The business breaks even when it sells 100 T-shirts.
Complex Scenarios
- If the break-even point is not a whole number, the business needs to sell an additional item to break even.
- For example: £401 ÷ (£10 − £6) = £401 ÷ £4 = 100.25 T-shirts
- In this case, the business must sell 101 T-shirts to break even.
Definitions
- Fixed costs: Expenses that remain constant regardless of output (e.g., rent).
- Variable costs: Expenses that change directly with output (e.g., raw materials).
Studying That Suits You
Use AI to generate personalized quizzes and flashcards to suit your learning preferences.
