5.4 Break-even

• At the break-even point, a business makes a profit.

  False
• What are fixed costs?

  Costs that do not change
• Fixed costs increase the break-even point, while variable costs decrease it.


  True
• Why is it important to understand fixed and variable costs?

  To calculate break-even
• What is the formula for calculating the break-even point in units?

  $\frac{\text{Fixed costs}}{\text{Selling price per unit - Variable cost per unit}}$
• A higher selling price per unit lowers the break-even point.


  True
• On a break-even graph, the vertical axis represents the monetary value
• What does the intersection of the total revenue and total cost lines represent on a break-even graph?

  Break-even point
• The total revenue line starts at the origin and increases linearly with the quantity sold
• What does the break-even point indicate in a break-even graph?

  No profit or loss
• How do fixed costs affect the break-even point?

  Increase the break-even point
• What is the formula to calculate the break-even point in units?

  $Break - even point =$$Fixed costs / (Selling price per unit - Variable cost per unit)$
• What happens to the break-even point if the selling price per unit increases?

  Lowers the break-even point
• Increasing fixed costs raises the break-even point
• Decreasing variable costs lowers the break-even point
• The break-even point in units is calculated using the formula: Fixed costs / (Selling price per unit - Variable cost per unit
• Increasing the selling price per unit lowers the break-even point
• Increasing fixed costs raises the break-even point.


  True
• On a break-even graph, what does the intersection of the total revenue and total cost lines indicate?

  No profit or loss
• Increasing the selling price per unit lowers the break-even point
• What is the impact of increasing fixed costs on the break-even point?

  Raises the break-even point
• What is the definition of the break-even point?

  Total revenue equals total costs
• Break-even analysis helps businesses determine the minimum sales required to cover their costs
• Variable costs are costs that vary directly with the level of output
• The break-even point can be illustrated using a graph that shows the relationship between a business's total revenue and total costs
• The vertical axis of a break-even graph represents the monetary value
• Increasing the selling price per unit lowers the break-even point
• Why is understanding the factors affecting the break-even point important for businesses?

  To make informed decisions
• At the break-even point, the business's outcome is a positive net income.

  False
• Variable costs remain constant regardless of output levels.

  False
• Increasing fixed costs raises the break-even point
• On a break-even graph, what does the horizontal axis represent?

  Quantity sold
• The total revenue line on a break-even graph starts at the origin.


  True
• What is the relationship between a business's total revenue and total costs illustrated in a break-even graph?

  Relationship between revenue and costs
• The total cost line includes a fixed cost component represented by the y-intercept.


  True
• Fixed costs are costs that do not change with the level of output
• Variable costs increase with higher output.


  True
• Increasing fixed costs raises the break-even point
• Decreasing variable costs lowers the break-even point.


  True
• Increasing the selling price per unit lowers the break-even point.


  True