C4 Break-even point and break-even analysis

What is a break-even point?

• The point at which a business makes a profit

• The point at which a business makes a loss

• 
  The point at which revenue and total costs are the same, meaning the business makes neither a profit or a loss

What does the margin of safety show?

• The amount by which sales exceed the break-even point

• The number of sales a business needs to make to break even

• The maximum number of sales a business can make

How can a business increase its margin of safety?

• By increasing fixed costs

• By reducing variable costs or increasing sales

• By decreasing sales price

What is the correct calculation for break-even?

• 
  Variable costs ÷ (selling price − fixed costs)

• Fixed costs ÷ (selling price − variable costs)

• Selling price ÷ (fixed costs − variable costs)

Why is understanding the break-even point important for a business?

• It helps in determining the minimum sales needed to avoid losses

• It shows the maximum profit a business can make

• It indicates the total fixed costs of a business

​ Which two of these is an example of a fixed cost?

• Raw materials

• Rent

• Shipping costs

• Salaries

Which of the following is a method to lower the break-even point?

• Reduce variable costs

• Decrease selling price

• Increase fixed costs

What impact does increasing the selling price have on the break-even point?

• It increases the break-even point

• It decreases the break-even point

• It has no effect on the break-even point

Which of the following factors can affect the margin of safety?

• Changes in fixed costs

• Both fixed and variable costs

• Changes in variable costs