Using break-even (Edexcel GCSE Business): Flashcards
📚Flashcards
Practise the cards
12 cards from this deck
ShowHide
Practise the cards
12 cards from this deck
Purpose of break-even analysis
Purpose of break-even analysis
Decision-making tool for planning & setting targets
Total revenue line slope represents
Total revenue line slope represents
Selling price per unit
Fixed costs line on break-even chart
Fixed costs line on break-even chart
Horizontal (costs constant regardless of output)
Total costs line starting point
Total costs line starting point
Starts at level of fixed costs
Break-even point definition
Break-even point definition
Where total revenue meets total costs (no profit/loss)
Margin of safety meaning
Margin of safety meaning
Cushion above break-even; how much sales can drop safely
Margin of safety formula
Margin of safety formula
Actual (or budgeted) sales - Break-even sales
How raising prices lowers break-even point
How raising prices lowers break-even point
Each unit contributes more to covering fixed costs
Methods to reduce variable costs
Methods to reduce variable costs
Find cheaper suppliers or improve production efficiency
Cutting fixed costs examples
Cutting fixed costs examples
Reduce rent or administrative costs/overheads
Key assumption of break-even analysis
Key assumption of break-even analysis
Business will sell every unit it produces
Risk of lowering prices to cut break-even
Risk of lowering prices to cut break-even
May signal poor quality, deterring customers