AS Business: Break-even & Profit loss

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  • Created on: 20-03-13 22:52
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Break-Even Analysis
Fixed Costs
(Contribution = Cost Price ­ variable cost)
Sales Revenue, Total costs and fixed costs can be plotted on a graph to show the level of break-even
output as well as the level of profits or losses at every possible level of revenue.
They will also show the margin of safety: the amount by which current output
exceeds the level of output necessary to break even.
The model assumes that costs increase constantly and that firms do not benefit from bulk
It assumes that the firms sell all its output at a single price, in reality firms offer discounts.
It assumes that all output is sold!
Poor quality data can result in inaccurate conclusions being drawn.
Profit & Loss Accounts (income statements)
These can measure the success of a business and assess the actual performance of the business compared with expectations. It can help with
obtaining loans and enables the managers to plan ahead.
GROSS PROFIT: Revenue ­ Costs of goods sold (Not taking
expenses and overheads into account)

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NET (or OPERATING) PROFIT: Gross profit ­ (Expenses + Overheads)
E.g.…read more


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