Understanding Break-even Analysis

What is the definition of a fixed cost in break-even analysis?

• A cost that varies with the level of output.

• A cost that remains constant regardless of the level of output.

• A cost that changes with the level of sales.

• A cost that is partially fixed and partially variable.

Which of the following is an example of a variable cost?

• Rent for the factory.

• Salaries of permanent staff.

• Raw materials used in production.

• Insurance premiums.

How is the break-even point calculated in units?

What does the margin of safety represent in break-even analysis?

• The difference between total revenue and total costs.

• The amount by which sales can drop before the business reaches its break-even point.

• The total fixed costs of a business.

• The total variable costs of a business.

Which of the following best describes semi-variable costs?

• Costs that do not change with the level of output.

• Costs that vary directly with the level of output.

• Costs that have both fixed and variable components.

• Costs that are incurred only when production stops.

In a break-even chart, what does the area above the break-even point represent?

• Area of loss.

• Area of profit.

• Area of fixed costs.

• Area of variable costs.

What is the formula for calculating total contribution?

• Total Revenue - Total Costs

• Total Sales - Total Variable Costs

• Total Revenue - Total Fixed Costs

• Total Sales - Total Fixed Costs

How can break-even analysis be used for planning?

• By determining the maximum production capacity.

• By identifying the most profitable product line.

• By setting sales targets to ensure profitability.

• By calculating the total fixed costs.

What is the selling price per unit if the total revenue is £10,000 and 500 units are sold?

• £15

• £20

• £25

• £30

Which of the following is a limitation of break-even analysis?

• It assumes that all costs are variable.

• It assumes that sales prices remain constant.

• It does not consider fixed costs.

• It is only applicable to large businesses.