Breakeven

Formula for unit contribution = Selling price

• + variable cost per unit

• x variable cost per unit

• - variable cost per unit

• divided by variable cost per unit

Selling price = £6, unit contribution = £2, variable cost per unit =

• £8

• £4

• £3

• £12

Breakeven = fixed costs

• plus unit contribution

• multiplied by unit contribution

• divided by unit contribution

• minus unit contribution

Fixed costs = £1200, unit contribution = £30

• breakeven = 4 units

• breakeven = 40 units

• breakeven = 400 units

• breakeven = 4800 units

Margin of safety = Current output (or sales) minus

• total variable costs

• total fixed costs

• total revenue

• breakeven

Sales = 600 units, breakeven = 350 units

• margin of safety = 250 units

• margin of safety = 350 units

• margin of safety = 950 units

• margin of safety = 600 units

A disadvantage of breakeven : It assumes all output is :

• scrapped

• sold

• sent back

• shoddy

Profit is shown in :

• bottom left triangle

• top right triangle

Profit can be calculated as margin of safety x

• unit contribution

• total contribution

• total variable costs

• fixed costs

Effect of an increase in selling price :

• more needed to breakeven

• less needed to breakeven

• same needed to breakeven