break even

• break even calculation


  Fixed costs/(selling price per unit - variable cost per unit)
• break even chart

  
• margin of safety


  diifference between level of output and break even point
• why break even figured change

  - an enterprise costs may increase

  - an enterprise may raise its prices (reach break even point faster)
• What is a downside of more sales?

  more sales -> more raw materials (costs)
• what does break even analysis allow owners to set?

  useful panning tool, helps owners set appropriate targets
• what can be identified through break even analysis?

  fixed and variable costs
• what is calculated through break even analysis?


  projected sales revenue
• what can the owner make adjustments to do?

  make adjustments to make a profit sooner
• what adjustments can the enterprise make to make a profit sooner

  - increase price

  - reduce costs through cheaper supplier
• what can the enterprise do to make maximum profit?

  best goods are stocked and sold to make max. profit
• risks of not completing break even analysis

  - costs are not known or too high

  - selling price too low or high

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• what is too low or high when the enterprise doesnt compete break even analysis?

  selling price is too low or high

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• what could be too much from not using break even analysis

  stock costs
• where overstocking creates costs

  - security (warehouse)

  - money spent on stock could be spent elsewhere
• what conditions does break even analysis assume will stay the same in the short term?

  (limitation)

  wages and rent will not stay the same
• what does break even analysis assume?

  that revenue and total costs are linear

  (often change at different output levels)

  e.g. price falls if you buy in bulk
• what types of businesses is break even analysis only simple for and difficult for?

  - only simple if an enterprise sells one type of product

  - but most sell a wide range with different costs and prices