N5 BM Breakeven

Multiple Choice

Which source of finance would a Private Limited Company (Ltd) use?

• share issue

• donations

• tax

Sources of Finance Questions

What can you remember from last lesson?

Multiple Select

Which are true of government grants? (choose all that apply)

• interest must be paid

• don't need to pay back

• must meet criteria

• you get it from the national lottery

Multiple Choice

You will NOT own the item when you buy it through Hire Purchase.

• true

• false

Multiple Choice

Choose the best description of a bank overdraft.

• It is an overdraft from a bank.

• Taking more money out of a bank account than is available.

• A loan of money from the bank repaid over time.

• A special type of loan used to purchase property.

Multiple Choice

Which source of finance would a charity use?

• share issue

• donations

• tax

Multiple Select

Which of the following are true of mortgages? (choose all that apply)

• used to buy property/land

• must pay interest

• does not need to be paid back

• short term method of finance

Multiple Select

Which is true of Leasing? (choose all that apply)

• Large amounts of money are not required up front to lease machinery

• Over time it can be a more expensive way to obtain assets

• The leasing company are responsible for repairs and maintenance

• Assets will eventually be owned by the business

• Equipment is not owned until the final payment is made

BREAK EVEN
ANALYSIS

1

Breakeven - Lesson 1

Importance of Planning and
Control

• Businesses must cover costs or they

will make a loss.

• Some new businesses will aim to only

cover costs or break-even(ie not make
a loss) in the first few years - to get
established.

• Profit is the amount made after costs

are paid.

• Forecasting income and costs allows

businesses to make decisions and
plans eg – get a loan or overdraft in a
month where income is low.

2

Dropdown

A business needs to calculate how many products they will have to sell to make a profit. If the business is not selling enough products to make a ​

Select answer

they would have to consider the purpose of continuing to trade.



The point at which a company has sold enough products or services to have covered all their ​

Select answer

is known as the ​

Select answer

​

Break-even is when a business is making ​

Select answer

a profit nor a loss.​

COSTS

All business incur costs - and
management accountants are charged
with controlling and tracking these
costs.

3

FIXED COSTS

These costs do not change as output changes.
For example rent is always £3,000 pa - the
landlord does not increase or decrease the
amount depending on how much is being
produced. Other examples include:

• Administration costs
• Insurance
• Rent & Rates
• Salaries
• Advertising

4

Reorder

Reorder the following

• fixed costs are

• costs that do not

• vary with

• the amount produced

1

2

3

4

• 1
• 2
• 3
• 4

VARIABLE COSTS

These costs do change in line with
output. As more is produced these costs
will increase.

Example include

• raw materials
• electricity/gas

5

Reorder

Reorder the following

• variable costs are

• costs that

• vary with

• output

1

2

3

4

• 1
• 2
• 3
• 4

Categorize

Options (8)

rent

advertising

rates

salaries

raw materials

electricity

gas

insuranc

Organise these options into the right categories

Fixed Costs

Variable Costs

Categorize

Options (9)

advert

part-time baker- paid a salary

electricity

gas

insurance for premises

eggs

cake boxes

I own a bakery. Which of the following will be fixed costs or variable costs?

Fixed Costs

Variable Costs

REVENUE

Revenue is the total amount made by
selling the product or service.

6

Multiple Choice

Sales Revenue...

• is the total amount made by selling the product or service.

• is the total amount of profit made for the year.

• is a cost that changes with output

• is a cost that does not change as output changes

Break Even Point
Break-even is where the total costs and
revenue are equal.

UNITS OF

PRODUCTION

FIXED
COSTS

VARIABLE

COSTS

TOTAL
COSTS

REVENUE

PROFIT/

LOSS

0

14000

0

14000

0

-14000

1000

14000

8000

22000

12000

-10000

2000

14000

16000

30000

24000

-6000

3000

14000

24000

38000

36000

-2000

4000

14000

32000

46000

48000

2000

5000

14000

40000

54000

60000

6000

6000

14000

48000

62000

72000

10000

7000

14000

56000

70000

84000

14000

8000

14000

64000

78000

96000

18000

9000

14000

72000

86000

108000

22000

7

Break Even Chart

8

Costs &
Revenues
(£)

Quantity

Sales
Revenue

Fixed Costs

Total Costs

Break-even
point

Multiple Choice

Total Costs =

• fixed costs + variable costs

• sales + fixed costs

• sales - variable costs

• fixed costs - variable costs

Hotspot

Where is the Break Even Point?

• The area to the left of BEP shows the

losses made at the appropriate levels of
sales since Total Cost is greater than the
Sales Revenue.

• The area to the right of BEP shows the

profits made at the appropriate levels of
sales since Sales Revenue is greater
than the Total Cost.

• Therefore the BE chart allows you to

calculate whether a profit or loss will be
made at any level of sales.

9

Interpreting the chart

• Up until break-even point the company

is making a loss

• After break-even point the company is

making a profit

10

Fill in the Blank

(a) From the break even chart, identify:

the number of cakes sold at the Break-Even Point;

Fill in the Blank

(a) From the break even chart, identify:

Total Costs at Break-Even Point

Open Ended

Define the following terms:

• Break-Even

• Fixed Costs

• Variable Costs

(3 marks)

Define the following terms. • Break-Even • Fixed Costs • Variable Costs
(3 marks)

• Break-even - where the business does not make a profit or a loss

• Fixed Costs – costs which do not vary with output or sales  

• Variable Costs – costs which do vary with output or sales  

Breakeven - Lesson 2

Categorize

Options (8)

rent

advertising

rates

salaries

raw materials

electricity

gas

insuranc

Organise these options into the right categories

Fixed Costs

Variable Costs

Multiple Choice

Sales Revenue...

• is the total amount made by selling the product or service.

• is the total amount of profit made for the year.

• is a cost that changes with output

• is a cost that does not change as output changes

Multiple Choice

Total Costs =

• fixed costs + variable costs

• sales + fixed costs

• sales - variable costs

• fixed costs - variable costs

Match

Match the following

• The total amount made by selling the product or service.

• These costs do change in line with output.

• These costs do not change according to output

• Where the total costs and revenue are equal.

SALES REVENUE

VARIABLE COSTS

FIXED COSTS

BREAK-EVEN POINT

• SALES REVENUE

• VARIABLE COSTS

• FIXED COSTS

• BREAK-EVEN POINT

Fill in the Blank

How many units are being sold at Break Even Point?

Fill in the Blank

How much revenue is being generated at Break Even Point?

Working out profit and loss

The table below gives an example of business's costs and sales:

Working out profit and loss

• Fixed costs are £800 regardless of output

• Variable costs increase as output increases

Fill in the Blank

How many units are sold at BEP?

Fill in the Blank

What amount of sales revenue is made at BEP?

Calculating total profit

To calculate the company's total profit or loss you subtract the total costs from the sales revenue:

total profit/loss = sales revenue - total costs

When neither a profit nor loss is made the company breaks even. This company would have to sell 200 units to break even.

Fill in the Blank

Remember!

Total profit/loss = sales revenue - total costs

What is the profit/loss made at 0 units?

-

Fill in the Blank

What is the profit/loss made at 300 units?

Fill in the Blank

What is the profit/loss made at 200 units?

Calculating selling price

Selling price can be calculated by dividing the sales revenue by the output:

selling price = sales revenue/output

In the example above the sales revenue at break-even is £1200 and 200 units are sold. This would mean the selling price per unit would be £6.

Multiple Choice

Selling Price -

• sales revenue/output

• output/sales revenue

• sales revenue/profit

• profit/sales revenue

Fill in the Blank

Remember! Selling price = sales revenue/output

Output: 4

Fixed costs: £230

Variable costs: £200

Total costs: £430

Sales revenue: £400

Profit/loss: -30

What is the selling price of this product?

Fill in the Blank

Output: 500

Fixed costs: £10,000

Variable costs: £10,000

Total costs: £20,000

Sales revenue: £600,000

Profit/loss: £580,000

What is the selling price of this product?

Fill in the Blank

Output: 1250

Fixed costs: £10,000

Variable costs: £10,000

Total costs: £20,000

Sales revenue: £1,625

Profit: -18,375

What is the selling price of this product?

.