Break-even (OCR GCSE Business): Flashcards

Decision for an order outside usual routine

How much sales can fall before break-even

How much each unit sold contributes to covering fixed costs

When total revenue = total costs

Number of units produced at break-even point

Selling price - variable cost per unit

Contribution per unit x Number of units sold

Fixed costs / Contribution per unit

Actual output - Break-even output

Can examine scenarios to plan ahead & reduce risk

Gives targets, increases motivation & productivity

Assumes variable costs stay same (ignores economies of scale)

Assumes all units produced are sold