6 A Costs, Revenue, Profit and Break-Even Point

What is the break-even point?

• The point at which a business makes a profit

• The point at which a business makes a loss

• The point at which revenue and total costs are the same, meaning the business makes neither a profit nor a loss

What is the correct calculation for break-even?

• Variable costs ÷ (selling price − fixed costs)

• Fixed costs ÷ (selling price − variable costs)

• Selling price ÷ (fixed costs − variable costs)

• Revenue ÷ (fixed costs − variable costs)

If fixed costs are £12,000, the selling price is £5 and the variable cost is £2 per unit, what is the break-even point?

• 5000 units

• 4000 units

• 4200 units

• 4500 units

Which of these statements best describes profit?

• Profit is any revenue left after all costs have been deducted

• Profit describes when a business has spent more than its revenue

• Profit is where a revenue and costs are the same

• Profit is what is below the break-even point

What is the correct calculation for revenue?

• Revenue = Selling price × Quantity sold

• Revenue = Selling price × Fixed costs

• Revenue = Quantity sold × Costs of sales

• Revenue = Variable costs x fixed costs

What is a fixed cost?

• A cost that changes depending on the level of output

• A cost that doesn't change, no matter what the level of output

• A cost that sometimes changes, and sometimes stay the same

• A Cost that varies according to inflation

If a business has fixed costs of £5,600 and variable costs of £1,225, what are the total costs?

• £6,845

• £5,765

• £6,825

• £4,375

Timmy wants to start a lemonade stand. He has decided to use his savings to purchase the newest and fastest blender called the BlendAll which costs $400, and in addition he buys lemons, water, sugar, and ice at a cost of $.15 per cup of lemonade. If Timmy decides to sell his lemonade at $1.25 per cup, how many cups of lemonade will he have to sell to break even?

• $ 364

• $320

• $ 275

• $90

Why is it important for a new business owner to calculate his or her breakeven point?

• It is the point at which the company is making a loss and may need to consider restructuring or closing.

• It is a way the business owner can predict the amount that he or she needs to spend to keep the business functioning.

• It allows the company owner to predict what his or her sales will be.

• It is a way for the company owner to see the point at which he or she will cover all costs and begin making a profit.

Profit =________ ___ ________

• Costs+ Materials

• Total Revenue –Total Costs

• Revenue + Costs

• Total Costs – Fixed Costs