breakeven

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breakeven point
the point at which sales/revenue and total costs are the equal
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breakeven calculation
fixed costs / contribution
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contribution
selling price - variable costs
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margin of safety
amount sales can drop before reaching the BEP (breakeven point)
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fixed costs
not directly linked to the level of output (how much is produced) e.g. rent, insurance
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variable costs
directly linked to the level of output (how much is produced) e.g. raw materials
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margin of safety calculation
if current sales are 2000 and the BEP is 1200. the margin of safety will be 2000 - 1200 = 800 units
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benefits of BEP
calculate the minimum sales needed to breakeven and prevent a loss
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benefits of BEP
examine the impact of any changes of variable costs, fixed costs or selling price on the breakeven point
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benefits of BEP
is worth while producing/ selling a particular good/service
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limitations of BEP
estimates of sales/ costs may not be 100% accurate
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Other cards in this set

Card 2

Front

fixed costs / contribution

Back

breakeven calculation

Card 3

Front

selling price - variable costs

Back

Preview of the back of card 3

Card 4

Front

amount sales can drop before reaching the BEP (breakeven point)

Back

Preview of the back of card 4

Card 5

Front

not directly linked to the level of output (how much is produced) e.g. rent, insurance

Back

Preview of the back of card 5
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