Breakeven Analysis Definitions

Fixed Cost- costs that remain the same irrespective of output levels. E.g. Rent rates salaries

Variable Cost- costs that change as output levels change. E.g. Raw material electricity

Revenue- name given to the money coming in to the firm by selling products.

BreakEven- if a firm's total revenue is equal to its total costs its Breakeven.

Breakeven quantity formula- fixed costs / contribution per unit

Contribution- Selling price per unit - Variable costs per unit

BEQ = Fixed costs / Selling price per unit - Variable costs per unit

Margin of Safety- between BEQ and current output where profit is guaranteed