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Business - Break-even Analysis
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Contribution per unit = selling price per unit variable cost per unit Contribution leftover amount of money after variable costs have been subtracted money contributes to fixed costs, and then towards profits The higher the margin, the less likely a loss making situation arises 1 Break-even chart shows a company's revenues and casts at all possible levels of demand-output ↓ Break- fixed costs even contribution per unit Margin of safety amount of which demand can fall before firm makes a loss BREAK-EVEN ANALYSIS = compares revenue against fixed and variable costs to identify minimum sales to make a profit Advantages ✓good for estimating future level of output they need to produce and sell easy +simple to understand ✓valuable for when a firm first establishes ✓copes with changing circumstances Break-even uses predict output required assess impact of price changes on profit assess if changes in fixed or variable costs impacts X • ● profit supports applications for loans economies Disadvantages x assumes costs constantly increase and don't benefit from E.O S * assumes firm sells all outputs at a single cost x changes in factors make it difficult for forecasting pays little attention to realities of market of scale
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Summary mind map of break-even analysis
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Contribution per unit = selling price per unit variable cost per unit Contribution leftover amount of money after variable costs have been subtracted money contributes to fixed costs, and then towards profits The higher the margin, the less likely a loss making situation arises 1 Break-even chart shows a company's revenues and casts at all possible levels of demand-output ↓ Break- fixed costs even contribution per unit Margin of safety amount of which demand can fall before firm makes a loss BREAK-EVEN ANALYSIS = compares revenue against fixed and variable costs to identify minimum sales to make a profit Advantages ✓good for estimating future level of output they need to produce and sell easy +simple to understand ✓valuable for when a firm first establishes ✓copes with changing circumstances Break-even uses predict output required assess impact of price changes on profit assess if changes in fixed or variable costs impacts X • ● profit supports applications for loans economies Disadvantages x assumes costs constantly increase and don't benefit from E.O S * assumes firm sells all outputs at a single cost x changes in factors make it difficult for forecasting pays little attention to realities of market of scale
Contribution per unit = selling price per unit variable cost per unit Contribution leftover amount of money after variable costs have been subtracted money contributes to fixed costs, and then towards profits The higher the margin, the less likely a loss making situation arises 1 Break-even chart shows a company's revenues and casts at all possible levels of demand-output ↓ Break- fixed costs even contribution per unit Margin of safety amount of which demand can fall before firm makes a loss BREAK-EVEN ANALYSIS = compares revenue against fixed and variable costs to identify minimum sales to make a profit Advantages ✓good for estimating future level of output they need to produce and sell easy +simple to understand ✓valuable for when a firm first establishes ✓copes with changing circumstances Break-even uses predict output required assess impact of price changes on profit assess if changes in fixed or variable costs impacts X • ● profit supports applications for loans economies Disadvantages x assumes costs constantly increase and don't benefit from E.O S * assumes firm sells all outputs at a single cost x changes in factors make it difficult for forecasting pays little attention to realities of market of scale
Can't find what you're looking for? Explore other subjects.
Knowunity is the # 1 ranked education app in five European countries
Knowunity was a featured story by Apple and has consistently topped the app store charts within the education category in Germany, Italy, Poland, Switzerland and United Kingdom. Join Knowunity today and help millions of students around the world.
Still not sure? Look at what your fellow peers are saying...
iOS User
I love this app so much [...] I recommend Knowunity to everyone!!! I went from a C to an A with it :D
Stefan S, iOS User
The application is very simple and well designed. So far I have found what I was looking for :D
SuSSan, iOS User