Breakeven analysis

The difference between the actual output and the breakeven level is known as the:

• Buffer zone

• Minimum cost line

• Current ratio

• Margin of safety

At any level of output below the breakeven point, a business will:

• Make a profit

• Make a loss

• Increase selling price

• Incur fixed costs

Which of these formulae defines the point at which breakeven occurs?

• None of these

• Total Revenue = Total Costs

• Total Profit = Total Costs

• Total Revenue = Total Price

Breakeven output can be calculated by dividing total fixed costs by:

• Variable cost per unit sold

• Selling price per unit sold

• Contribution per unit sold

• Total variable costs

If the margin of safety is 7,500 units and breakeven output is 12,200 units, what is actual output?

• 4,700 units

• 19,700 units

• $19,700

• $4,700

An option for a firm looking to reduce its breakeven point is to:

• Reduce its selling price

• Undertake an advertising campaign

• Give the staff a pay rise

• Buy cheaper raw materials

A baker's fixed costs are $10,000, sells cakes at SP of $45 and the VC per cake is $25. What is the breakeven level of production?

• 500 units

• 20 units

• 50 units

• 5,000 units

Other things remaining the same, an increase in fixed costs will:

• Increase the breakeven output

• Reduce unit costs

• Decrease the breakeven output

• Increase contribution

What are Fixed Costs?

• the amount of money allocated for a business to use in certain departments

• business costs, such as rent, that do not vary because of the amount of goods produced

• costs that change depending upon the output

• the point in a business when the profits are equal to costs

If average variable cost is £10, and average selling price is £25, then what is contribution?

• £35

• £15

• £-15

• £40