is the point at which a business isn't making a profit but also isn't making a loss
1 of 12
define margin of safety
the amount current output exceeds the amount necessary to break even
2 of 12
breakeven formula
break even point = total fixed cost/ (selling-variable cost per unit)
3 of 12
disadvantages of breakeven analysis
fixed costs are unlikely to stay constant, variable cost and sales revenue is unlikely to stay in a straight line, makes assumptions, can be completely different if one factor changes
4 of 12
advantages of break even analysis
easy way to measure the impact on profits as level of business changes, examine 'what if's'
5 of 12
formula for profit
revenue - total cost
6 of 12
define fixed cost
are cost that does not vary with the level of output. fixed cost exist even if a business is not producing goods or service
7 of 12
define variable costs
vary directly with output they include labour, fuel, and raw materials
8 of 12
define semi-variable costs
are expense incurred by a business that have fixed and variable elements
9 of 12
define revenue
is the income a business earn from selling its goods and service
10 of 12
formula of total cost
total cost = fixed cost + variable cost
11 of 12
formula of revenue
revenue = quantity sold x average selling price
12 of 12
Other cards in this set
Card 2
Front
define margin of safety
Back
the amount current output exceeds the amount necessary to break even
Comments
No comments have yet been made