Unit 3 - Breakeven, profit, cost and revenues

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  • Created by: sade
  • Created on: 30-12-13 17:52
define breakeven
is the point at which a business isn't making a profit but also isn't making a loss
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define margin of safety
the amount current output exceeds the amount necessary to break even
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breakeven formula
break even point = total fixed cost/ (selling-variable cost per unit)
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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
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advantages of break even analysis
easy way to measure the impact on profits as level of business changes, examine 'what if's'
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formula for profit
revenue - total cost
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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
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define variable costs
vary directly with output they include labour, fuel, and raw materials
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define semi-variable costs
are expense incurred by a business that have fixed and variable elements
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define revenue
is the income a business earn from selling its goods and service
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formula of total cost
total cost = fixed cost + variable cost
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formula of revenue
revenue = quantity sold x average selling price
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Other cards in this set

Card 2

Front

define margin of safety

Back

the amount current output exceeds the amount necessary to break even

Card 3

Front

breakeven formula

Back

Preview of the front of card 3

Card 4

Front

disadvantages of breakeven analysis

Back

Preview of the front of card 4

Card 5

Front

advantages of break even analysis

Back

Preview of the front of card 5
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