Breakeven Analysis

What are fixed costs?

• Fixed costs are expenses that vary with the level of production or sales.

• Fixed costs are expenses that remain constant regardless of the level of production or sales.

• Fixed costs are expenses that decrease as production increases.

• Fixed costs are expenses that are one-time payments.

Define variable costs.

• Revenue generated from sales

• Fixed costs that remain constant regardless of business activity

• Expenses that change in proportion to the activity of a business.

• Costs incurred only once at the beginning of a business

What is the break-even point?

• The break-even point is the level of sales at which profit is maximized.

• The break-even point is the level of sales at which total costs exceed total revenue.

• The break-even point is the level of sales at which total revenue equals total costs.

• The break-even point is the level of sales at which total revenue exceeds total costs.

What is company's contribution margin?

• $10

• $13

• $14

• $17

What is company's breakeven point in units?

• 10,000

• 14,000

• 20,000

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

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

• £35

• £15

• £-15

• £40

If the average variable costs £10, average selling price is £25 and fixed costs are £60,000, then what is the break-even output?

• 5000

• 7000

• 6000

• 4000

What is a business doing when it sells output beyond the break-even point?

• Making a loss

• Making a profit

• Making neither a profit or loss

• It is not possible to tell from the graph