# Break-even Analysis (pg 78-79)

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sajidusu's
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2016-04-13 05:39

## Summary

Please answer these questions by clicking on the question marks:

Question | Answer |
---|---|

What is the Break-even output? | The Break-even output is the level of sales a busienss needs to cover its costs. |

What is the equation for Contribution per unit? | Contribution per unit = selling price per unit - variable costs per unit |

How do you work out Total Contribution? | Total Contribution = total revenue - total variable costs or contribution per unit x number of units sold |

Where does contribution=fixed costs? | The break-even output! |

How do you work out the margin of safety? | Margin of Safety = actual output - break-even output |

One disadvantage of Break-even analysis. | If the data is wrong, the results will be wrong. |

One advantage of Break-even analysis. | Its easy to do. If you can plot figures on a graph accurately, you can do break-even analysis. |

Muneer Khan has a small restaurant. The average price per customer per meal is £13. The variable costs of materials and labour per meal are £5. The fixed costs of the restaurant are £1000 per mont. Calculate the break-even number of customers per month. | 125 customers |

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