5.5 Understanding Break-Even

Is break-even analysis used to review past business performance or predict future performance?

• Review past performance

• Predict future performance

A large company manufactures a single healthcare product for hospitals. Each unit is sold to customers for $80. The average variable cost of manufacturing the product is $50. Total fixed costs for the year are $40,000. The company strives to achieve a target profit of $80,000 for the year.

Calculate the break-even quantity for the company.

• 1343

• 1300

• 1334

• 1332

If i multiply the value of my margin of safety by my selling price - what do I calculate?

• Total Costs

• Revenue for my Margin of Safety

• Profit

• Margin of Revenue

Label all the green bits

a

b

c

d

e

f

Break Even Level of Output

Profit

Total Revenue

Break Even Point

Total Costs

Margin of safety