Break Even Word Problems

Front

What is a break-even point?

Back

The break-even point is the level of sales at which total revenues equal total costs, resulting in no profit or loss.

Front

How do you calculate total cost in a business?

Back

Total cost is calculated by adding fixed costs (costs that do not change with the level of output) to variable costs (costs that vary with the level of output).

Front

What is the formula for income in a business?

Back

Income can be calculated using the formula: Income = Price per unit × Number of units sold.

Front

What are fixed costs?

Back

Fixed costs are expenses that do not change regardless of the level of goods or services produced, such as rent or salaries.

Front

What are variable costs?

Back

Variable costs are expenses that vary directly with the level of production, such as materials and labor.

Front

How do you determine profit?

Back

Profit is determined by subtracting total costs from total income: Profit = Total Income - Total Costs.

Front

What is the significance of the break-even analysis?

Back

Break-even analysis helps businesses understand the minimum sales needed to avoid losses and informs pricing and budgeting decisions.

Front

If a haircut costs $1.50 and is sold for $15, what is the contribution margin per haircut?

Back

The contribution margin per haircut is calculated as Selling Price - Variable Cost = $15 - $1.50 = $13.50.

Front

How many haircuts must Brian and Amy sell to break even if they invested $2700?

Back

To break even, they need to sell 200 haircuts, calculated as Fixed Costs / Contribution Margin = $2700 / $13.50.

Front

What is the formula for calculating profit in a ticket sales scenario?

Back

Profit = (Price per ticket × Number of tickets sold) - (Fixed costs + (Variable cost per ticket × Number of tickets sold)).