Business AS LEVEL COSTS

Break-even point ...

• the level of output at which total costs equal total revenue, when neither a profit nor a loss is made.

• the section of a business, such as a department or a product, that incurs the costs.

• a method of costing in which all indirect and direct costs are allocated to the products, services or divisions of a business.

• total cost divided by the number of units produced.

Contribution per unit

• the price of a product less the direct (variable) costs of producing it.

• costs that cannot be identified with a unit of production or allocated accurately to a cost centre

• these costs can be clearly identified with each unit of production and can be allocated to a cost centre.

• uses cost and revenue data to determine the break-even point of production

the amount by which the current output level exceeds the break-even level of output.

• Indirect costs

• Contribution Margin

• Margin of safety

• Contribution costing

variable cost plus fixed cost ...

• Indirect costs

• Variable costs

• Total cost

• Direct costs

these costs can be clearly identified with each unit of production and can be allocated to a cost centre.

• Marginal cost

• Direct costs

• Fixed costs

• Indirect costs

Draw the Total Cost

Breakeven point = Fixed costs ÷ (Price per cake - Variable costs per cake)

• Correct Formula

• Incorrect Formula

Let's say you own a bakery that produces cakes. Your bakery has a monthly rent of $1,000, which is a fixed cost that does not change regardless of how many cakes you produce. The cost of the ingredients and labor to produce each cake is $10, which is a variable cost that increases as you produce more cakes. You sell each cake for $30. Calculate breakeven point.

• 20 cakes

• 50 cakes

• 120 cakes

• 47 cakes