Break-even Analysis

What is break-even in financial terms?

• The point at which revenue exceeds total costs

• The point at which profit is maximized

• The point at which revenue and total costs are the same

• The point at which total costs exceed revenue

What does break-even analysis show a business?

• How many products they need to sell to ensure a profit

• How to reduce fixed costs

• How to increase variable costs

• How to maximize losses

What is the margin of safety in break-even analysis?

• The amount sales can fall before the break-even point is reached and the business makes no profit

• The amount of profit a business makes above the break-even point

• The total costs of a business

• The total revenue of a business

What are variable costs in a business?

• Expenses that change directly with output, like raw materials

• Expenses that are not important for break-even analysis

• Expenses that remain constant regardless of output

• Expenses that are not related to production

What is represented by the space below the break-even point on a break-even graph?

• Profit

• Loss

• Fixed costs

• Variable costs

How is the break-even point displayed on a break-even graph?

• As the highest point on the graph

• As the point where revenue and total costs lines cross

• As a straight line across the graph

• As the lowest point on the graph

What does the revenue line on a break-even graph represent?

• Fixed costs

• A decrease in revenue with the level of output

• Variable costs

• An increase in revenue with the level of output

What is the calculation for margin of safety?

• Actual sales / break-even sales

• Actual sales + break-even sales

• Actual sales - break-even sales

• Actual sales * break-even sales

What can a company use the margin of safety for?

• To reduce variable costs

• To maximize losses

• To see if a product is worth selling

• To increase fixed costs

What is one drawback of break-even analysis?

• It shows the amount of revenue at each level of output

• It is quick and easy to analyze

• It accurately predicts all future sales

• Businesses can be unrealistic in their calculations