Understanding Break-even Analysis

What is the break-even point in a business context?

• The point where total costs equal total revenue

• The point where total revenue exceeds total costs

• The point where fixed costs are covered

• The point where variable costs are minimised

Which of the following is considered a fixed cost?

• Raw materials

• Rent

• Packaging

• Commission on sales

How is the margin of safety calculated?

• Total revenue minus total costs

• Actual sales minus break-even sales

• Fixed costs divided by contribution per unit

• Variable costs divided by total revenue

In a break-even chart, what does the area of profit represent?

• The area above the break-even point

• The area below the break-even point

• The area between total revenue and total costs above the break-even point

• The area between fixed costs and total costs

What is the primary purpose of conducting a break-even analysis?

• To determine the maximum profit

• To find the level of sales needed to cover costs

• To calculate the total variable costs

• To assess the quality of products

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 provides a detailed analysis of profit margins

• It considers changes in market conditions

What does the term "variable costs" refer to?

• Costs that do not change with the level of output

• Costs that vary directly with the level of output

• Costs that are incurred only once

• Costs that are fixed over time

If a company has fixed costs of £10,000, a selling price per unit of £50, and variable costs per unit of £30, what is the break-even point in units?

• 200 units

• 300 units

• 400 units

• 500 units

Which of the following best describes total revenue?

• The sum of fixed and variable costs

• The total income from sales of goods or services

• The profit made after all expenses are deducted

• The cost of producing one additional unit

What is the significance of the break-even point for an enterprise?

• It indicates the maximum production capacity

• It shows the point at which the business starts to make a profit

• It determines the total fixed costs

• It highlights the variable cost per unit