GCSE Business Studies: Break-even 101

What does break even point show?

• where a business is neither making a profit or loss
• how many items to make
• how much profit they're making
• where a business has more fixed costs than variable

What assumption does this statement say "Break even is 54 units"?

• if we sell 55 we aren't making a profit

• if we sell 54 we begin to make a profit

• if we sell 55 we begin to make a profit

• if we sell 54 we are not yet at break even point

What is one limitation to calculating break even?

• helps projected sales
• based on estimates
• based on multiple products
• considers stock wastage

To draw the BE graph you must plot Total Costs and ........

• Total Production
• Total Revenue
• Total Fixed Costs
• Total Units

Some business costs are classified as fixed costs because they

• must be paid within a set time
• don't change when sales go up or down
• are unpredictable and must be estimated
• cost all businesses the same amount

It may be difficult for a new business to predict its variable costs because new businesses

• are sometimes short of working capital
• don't have access to industry figures
• may have inexperienced employees
• don't have past sales records

The formula to calculate revenue is:

• REVENUE = FIXED COSTS + VARIABLE COSTS

• REVENUE = VARIABLE COSTS * PRICE

• REVENUE = UNITS SOLD * PRICE

• REVENUE = UNITS SOLD * TOTAL COSTS

The formula to calculate Total Cost is:

• TOTAL COST = VARIABLE COSTS X FIXED COSTS

• TOTAL COST = VARIABLE COSTS + FIXED COSTS

• TOTAL COST = REVENUE - VARIABLE COSTS

• TOTAL COST = REVENUE - FIXED COSTS

What is represented by the purple region in the break even diagram shown here?

• The break even point

• Profit

• Loss

What is represented by the orange region in the break even diagram shown here?

• The break even point

• Profit

• Loss