is the point at which a business does not make a profit of loss
Break-Even Analysis
a technique that analyzes the relationship between total revenue and total cost to determine profitability at various levels of output
contribution
contribution looks at the surplus made on each product sold by the business. it shows how many products need to be sold to cover the fixed operation cost
Contribution calculation
contribution = Selling price - Variable Cost
Total Contribution
Contribution per unit x number of units sold
Break-Even Output
Fixed costs / contribution per unit
Margin of safety
The amount sales can fall before the break-even point
Advantages of BE
Gaining funding - required for business plans
Setting revenue targets
Decide appropriate pricing
Disadvantages of BE
Doesn't give an insight into chances sales will meet this point
