Break Even Analysis Knowledge Check

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

My total costs are £50,000 when selling 100 items. My fixed costs are £20,000. What must be the variable cost of one item? 

• £300
• £500
• £200
• Cannot be calculated

What is the break-even point in units for a company whose total fixed costs are £275,450; selling price per unit is £16; and variable cost per unit is £14.75?

• 220,360

• 150,300

• 183,633

• 225,120

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

A business that does not reach break-even will

• go bankrupt
• have profit and loss
• lose money
• need to relocate

Businesses calculate break-even in dollars so they know the

• amount of the business's after tax-earnings
• total dollar value of the stock on hand
• total dollar sales needed to reach break-even
• amount the business can spend on new purchases

Businesses calculate break-even in units so they know

• how much profit they will earn after they break even
• which products they should purchase for resale
• which costs are variable and which are fixed
• how many products they must sell to break even

What is the break-even point in units for a company whose total fixed costs are $275,450; selling price per unit is $16; and variable cost per unit is $14.75?

• 220,360
• 150,300
• 183,633
• 225,120