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Finance
6.3 Financial terms and calculations
Interpreting break-even charts:
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At the break-even point, a business generates neither profit nor
loss
.
True
What type of costs vary with the quantity of goods produced?
Variable costs
The break-even point is the level of sales where total revenue equals total
costs
Match the component with its description:
Total Revenue ↔️ Income from sales
Total Costs ↔️ Sum of fixed and variable costs
Break-Even Point ↔️ Revenue equals costs
What are examples of variable costs?
Raw materials, direct labor, packaging
Revenue
is calculated by multiplying the quantity of goods sold by their
prices
Revenue
, along with fixed costs and variable costs, helps determine profitability and break-even
points
What is the break-even point in sales terms?
Total revenue equals total costs
The break-even point is the level of sales where total revenue equals total
costs
Fixed costs
are costs that do not change with production
levels
At the break-even point, what is the relationship between total revenue and total costs?
Total revenue equals total costs
At the break-even point, a business generates neither profit nor loss.
True
Fixed costs
remain constant regardless of production
volume
How is revenue calculated?
Price per unit × number of units sold
What is the formula for marginal revenue?
Change in total revenue ÷ change in quantity sold
The key components of a break-even chart include fixed costs, variable costs, total revenue, and total
costs
What are fixed costs in a business?
Costs that do not change
What are examples of fixed costs?
Rent, salaries, insurance
Unlike fixed costs, variable costs fluctuate with output.
True
Where is the break-even point located on a break-even chart?
Intersection of revenue and costs
Fixed costs are expenses that do not change with production
volume
What are variable costs per unit?
Expenses that increase with production
What does a break-even chart show in relation to profit and loss areas?
Sales and costs
Why is identifying the break-even point important for businesses?
Determines sales required to profit
Match the component of a break-even chart with its description:
Fixed Costs ↔️ Expenses that do not change with production levels
Variable Costs ↔️ Expenses that vary with output
Total Revenue ↔️ Income from sales
Break-Even Point ↔️ Total revenue equals total costs
Unlike fixed costs, variable costs change directly with
output
Understanding total revenue, fixed costs, and
variable costs
is essential for determining profitability.
True
Marginal revenue is the income from selling one additional
unit
.
True
The break-even point signifies no profit and no loss.
True
What is the break-even point in units if fixed costs are $10,000, selling price per unit is $50, and variable costs per unit are $30?
500 units
What does the margin of safety indicate for a business?
Risk tolerance
A margin of safety of 33.33% means sales can decrease by that amount before losses occur.
True
What is the break-even point defined as?
Total revenue equals total costs
What does a break-even chart illustrate the relationship between?
Total revenue and total costs
What is the term for income from sales at different output levels?
Total revenue
What are examples of fixed costs?
Rent, salaries, insurance
Variable costs change proportionally with
production levels
.
True
Total revenue is the income earned from all sales within a period.
True
At the break-even point, what is the relationship between total revenue and total costs?
Total revenue equals total costs
A break-even chart is a graphical representation of a business's costs, revenue, and
profit
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