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WorksheetsT-levels Mgt & Admin: Break-even
Total questions: 20
Worksheet time: 11mins
Which of the following are examples of variable costs? (Multiple correct answers)
Rent
Raw material
Sales commissions
Packaging
Which of the following are examples of fixed costs? (Multiple correct answers)
Electricity
Insurance
Packaging
Raw materials
Which of the following calculations gives the total costs of a business?
Adding fixed costs to sales revenue
Subtracting variable costs from sales revenue
Adding variable costs to fixed costs
Multiplying sales revenue and fixed costs
What would a business's total variable costs be for the month if their output for the month was zero.
Equal to fixed costs
Equal to sales revenue
Zero
Impossible to calculate
At what point does the total sales revenue equal total costs?
Break-even
Total costs
Contribution
Total variable costs
The formula for calculating break-even sales value is:
Fixed costs / (Selling price – Variable cost per unit)
Selling price × Fixed costs / (Contribution margin)
Fixed costs / (Selling price + Variable cost per unit)
Fixed costs / (Selling price + Variable cost per unit)
What are fixed costs divided by when calculating the break-even point? (Multiple correct answers)
Variable costs + Sales price per unit
Contribution
Sales price per unit x Fixed costs
Sales price per unit - variable cost per unit
A baker's variable costs per loaf of bread are 40p and their daily fixed costs are £120.
If 250 loaves are produced and sold daily at £1 each, what is the baker's daily profit?
£40
£30
£20
£10
The formula for calculating break-even point (units) is:
Fixed costs / (Selling price + Variable cost per unit)
Selling price – Variable cost per unit
Fixed costs / (Selling price – Variable cost per unit)
Selling price × Fixed costs / (Contribution margin)
When you calculate the break-even units, the formula may produce a number with decimals.
The correct way to handle a decimal in this case is:
Always round down, a partial unit cannot be sold
Always round up, a partial unit cannot be sold
Keep as a decimal, a partial unit can be sold
Re-calculate until another result is achieved
Company A sells only one product with a selling price of £200 per unit and a variable cost of £80 per unit. The company's monthly fixed costs are £60,000.
How many units must Company A produce and sell per month to break-even?
5,000 units
£500
500 units
250 units
**Challenger question**
If the same company (Company A) wanted a net profit for the month of £30,000, how many units would they have to sell? (Challenger question)
500 units
1,000 units
750 units
£1,000
A business has an average selling price of £2.50 per unit. The variable cost per unit is 1/5 of the selling price and last month the business sold 20,000 units. What is the contribution per unit for last month?
£2.50
£0.50
£2.00
£4.00
Company B's data is as follows:
Fixed costs per month: Rent (£3,550), Electricity (£450), Salaries (£10,500), Marketing (£1,325)
Variable costs per unit: £35
Selling price per unit: £85
How many units would they need to sell to break-even?
515
316
517
317
Company C's monthly data is as follows:
Fixed costs = £6,000
Selling price per unit = £4
Variable cost per unit = £0.80
To achieve break-even the sales value the company would need to achieve is:
£7,500
£7,000
£8,000
£6,000
Company C intends to move premises which would result in fixed costs increasing by 5%. What sales value would the company need to achieve to break-even after the move?
£7,550
£7,500
£7,875
£8,500
Company D’s monthly data is as follows:
Fixed costs = £10,500
Variable costs per unit = Raw materials (£12), Packaging (1/3 cost of raw materials), Sales commissions £30
Selling price per unit = 4x Sales commissions per unit
To achieve break-even point the company would need to achieve ___ units or ___ sales value:
140 units or £17,020
142 units or £17,027.03
141 units or £17,027.03
141 units or £27,027.03
John calculated the number break-even units for his new business idea as being 12,345.86.
The number of units John's company will actually need to produce and sell to break-even is:
12,345.86 - break-even units can be decimal
12,345.8 - break-even units can be decimal
12,345 - break-even units can't be decimal and should always be rounded down
12,346 - break-even units can't be decimal and should always be rounded up
An ice-cream manufacturer's monthly data is as follows:
Break-even point (units) = 2,340
Variable cost per unit = £0.75
Selling price per unit = £1.30
What is the company's monthly Fixed costs?
£128
£1,287
£2,871
£12,870
Why is it important for businesses to know the breakeven points of their products?
It isn't important
So they can use the information when preparing financial statements
It can be used in the process of planning
Its an important calculation in accounting
