BREAKEVEN POINT & MARGIN OF SAFETY

What is meant by the term "break-even"?

• The amount a business must pay in costs is greater than the amount it must sell to earn revenue.

• It is where the profit made is greater than the loss as revenue is greater than total costs.

• The amount a business must sell to earn enough revenue to just cover its costs so it does not make a profit or a loss.

• It is where the profit made is less than loss as revenue is less than total costs.

What is meant by contribution per unit?

• Fixed costs - selling price per unit

• Variable costs - Selling price per unit

• Selling price per unit - Fixed costs

• Selling price - Variable costs per unit

What is the break-even output if fixed costs are £30,000, selling price per unit is £20 and variable costs per unit are £8?

• £2,500

• 2,500

• £1,500

• £3,750

What is the break-even output if the amount charged to customers is £60, the cost of making each item is £25 and fixed costs are £700,000?

• £20,000

• £2,000

• 20,000

• 2,000

How would you determine the break-even point on a graph?

• Where the lines for total revenue and total costs cross

• Where the lines for total revenue and fixed costs cross

• Where the lines for total costs and fixed costs cross

• Where the lines for fixed costs and variable costs cres..

What is the formula for calculating profit using the break-even concept?

• Revenue - Selling price

• Fixed costs - Revenue

• Fixed costs / Revenue

• Revenue - Fixed costs

What is the profit (or loss) if 10 units were sold at a selling price of £85, the variable costs per unit was £25 and fixed costs were £300?

• 300

• (£300)

• £300

• £600

What is meant by the term "margin of safety"?

• The amount by which the actual output of a business is greater than its break-even output.

• The amount of safety involved in producing enough sales revenue to cover total costs

• The amount by which the break-even quantity of a business is greater than its actual output.

• The amount of sales needed to cover all the costs of the business.

What is the margin of safety if the break-even output (sales) is 250 and the actual sales is 600?

• 600

• 450

• 350

• 250

What is the total variable cost of producing 10,000 booklets if the selling price is £5, the variable cost per booklet is £2 and fixed costs are £30,000?

• £30,000

• £20,000

• £15,000

• £10,000