Break Even

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 the margin of safety?

• the margin between projected units and break even point units
• the margin between profit and loss
• the margin between units and sales
• the margin between each break even point

What is the formula for contribution?

• cost price - selling price

• fixed costs - variable costs

• selling price - variable cost

• selling price - cost price

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

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

Fixed costs: = £30,000

Variable cost: = £200 per photo shoot

Forecast output (Sales): = 140 photo shoots

Selling price: = £1000 per photo shoot

What is the Total Contribution?

• £112 000

• £112 500

• £375

• £800

Simon has worked out the following figures for new Bobble Hats he is going to sell. He estimates that he can produce 20 000 hats a month with a selling price of £3.50. He expects the machinery costs to be £60 000 per annum, staff salaries are £72 000 per annum and raw materials cost £30 000 per month.

What is the margin of safety?

• 66 000

• 74 000

• 200 000

• 174 000

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