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break-even (break-even charts: (the break-even point is where the total…
break-even
break-even charts:
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- fixed costs (horizontal line as fixed costs do not vary with output)
- variable costs (will increase with outputs)
- total costs (the addition of fixed and variable costs)
- total revenue (price x quantity sold)
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break-even: is when the total revenue is equal to total costs so neither a profit nor a loss is made
break-even output: is the number of products the business needs to sell so total revenue equals total costs
margin of safety: shows how many units of sales can afford to be lost before the firm starts to make a loss
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break-even output = total fixed costs / contribution per unit (price per unit - variable cost per unit)
contribution per unit: looks at how much the sale of one product contributes towards paying off the fixed costs
total contribution looks at how much the sale of all of the businesses products contributes towards paying off the fixed costs