Break Even Analysis

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Break Even
The point where a firm makes neither a profit or a loss || Where the total revenue meets/equals to the total cost
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Break Even Formula
BreakEvenOutput = Fixed Cost / Contribution per unit
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Contribution (per unit)
Contribution = Selling Price - Variable Costs
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Target Profit Output
Target Profit Output = Selling Price - Variable Costs
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Margin Of Safety
Expected Output - Break Even Output
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Usefullness of Break Even
It can assess how long it will take to meet the total revenue || You can judge if the fixed/variable costs can be changed
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Strengths Of Break Even
Can predict profit || Easy and quick to calculate || Can calculate the amount of sales you need to meet your target
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Weaknesses Of Break Even
Selling Price always has to stay the same || Assumes every product will be sold || Variable costs may change if bought in bulk, or supplier may change prices
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Other cards in this set

Card 2

Front

BreakEvenOutput = Fixed Cost / Contribution per unit

Back

Break Even Formula

Card 3

Front

Contribution = Selling Price - Variable Costs

Back

Preview of the back of card 3

Card 4

Front

Target Profit Output = Selling Price - Variable Costs

Back

Preview of the back of card 4

Card 5

Front

Expected Output - Break Even Output

Back

Preview of the back of card 5
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