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Chapter 32: Breakeven - Coggle Diagram
Chapter 32: Breakeven
Breakeven Point
Breakeven point: the point at which total revenue and total costs are the same.
Where total revenue= total costs :
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Breakeven output: the output a business needs to produce so that its total revenue & total costs are the same.
To work out the units needed to reach a target amount of profit, add target profit to fixed costs.
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Contribution
The money left over after variable costs have been subtracted from revenue.
The money contributes towards fixed costs & profit
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Breakeven Chart
Breakeven chart: a graph containing the total cost and total revenue lines, illustrating the break-even output.
It can be used to identify:
Fixed costs, total costs, and revenue over a range of output
Breakeven point
Profit/loss made at each level of output
Margin of safety
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Margin of Safety
The range of output between the break-even level and the current level of output, over which a profit is made.
On a breakeven chart, it is the distance between break-even output and current/actual output
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