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Break-even alalysis - Coggle Diagram
Break-even alalysis
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What does it show?
The break even point is the point at which a businesses revenue generated through the sales of its products covers its total costs.
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Break-even analysis can be used to help a business make important decisions about cost, prices or expected profits.
In simple terms, break-even means to sell enough products to cover your costs, cover your bills and break-even - ensuring that your business does not make a loss.
Fixed costs
Costs that have to be paid on a monthly or weekly basis, regardless of your level of output. IT HAS TO BE PAID!!!!!
They are constant and unchanged (e.g. rent, insurance, salaries)
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Margin of safety
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The size of the margin of safety will determine the risk of the business - the margin of safety should be as high as possible.
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Variable costs
Costs that can change. Rises and falls with out level of output (e.g. raw materials, wages, deliveries)