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Business:Breakeven

T5

QuestionAnswer
Breakeven Forecast A prediction about the breakeven quantity based on estimates of future sales revenues and costs
Breakeven Quantity The amount a business must sell to earn enough revenue to cover its costs
Margin Of Safety The amount by which a business' actual output is greater than its break even output
Usefulness of break even analysis - See how much you need to sell - It will help when taking out loans - Can make decisions about price and costs - Can find expected profit - Shows the margins of safety
Limitations of break even analysis - Competitors may change - Prices may change because of promotions - Costs may change - A price increase could lead to fall in sales - The product may enter the decline stage
Breakeven Total fixed costs / (price - variable costs per unit)
Created by: lil.dripz
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