1434062
Description
Mind Map by virkstyteu, updated more than 1 year ago
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Created by virkstyteu
about 10 years ago
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Break even
- Fixed costs are costs that
do not change with output
- Rent
- Salary
- Insurance
- Tax
- Rent
- Variable costs are
costs that do change
with output
- Raw Materials
- Phone bill
- Wages/Comission
- Raw Materials
- Break even is the point
where sales are exactly
the same as costs
- It shows us how
many things need to
be sold to stop loss
and start making a
profit
- Break even point formula;
fixed costs/selling price -
variable costs per unti
- It shows us how
many things need to
be sold to stop loss
and start making a
profit
- For the table and chart method,
you should complete the table
first; using all the different
calculations. .
- Once that is complete, you are ready to plot the
graph using an appropriate scale. The y axis should be
labelled as costs and the x axis should be labelled
output
- Once that is complete, you are ready to plot the
graph using an appropriate scale. The y axis should be
labelled as costs and the x axis should be labelled
output
- Important
formulas to
remebmber
- Total revenue: Selling price per unit * Quantity sold
- Total costs: fixed
costs+ variable costs
- Total revenue: Selling price per unit * Quantity sold
- Advantages of
break even analysis
- Can calculate the number of
sales needed to break even
- Help sets
targets for
the future
- Can work out number of
sales needed to stop loss
- Can use a graph for
visual representation
- Can calculate the number of
sales needed to break even
- Disadvantages
of break even
- Assumes
no stocks
are being
held
- Doesn't consider
competition
- Incorrect data
can produce
inaccurate results
- Difficult for multi-product
businesses
- Assumes
no stocks
are being
held
- Using ICT can give you a
clear representation of what
is needed for your business
to break even
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