What is the break-even point?
The point at which a business makes a profit
The point at which a business makes a loss
The point at which revenue and total costs are the same, meaning the business makes neither a profit nor a loss
What does the margin of safety show?
The amount sales can fall before the break-even point is reached
The number of sales a business needs to make to break even
The maximum number of sales a business can make
What is the correct calculation for break-even?
Variable costs ÷ (selling price − fixed costs)
Fixed costs ÷ (selling price − variable costs)
Selling price ÷ (fixed costs − variable costs)
What is the correct calculation for margin of safety?
Actual sales − break-even sales
Projected sales − break-even sales
Actual profit − break-even sales
Which of these is the most likely result of an increase in costs?
The break-even point will decrease
The break-even point will increase
The margin of safety will increase
Which of these is the most likely result of a decrease in revenue?
Costs will increase
Profits will increase
Profits will decrease
How is a loss shown on a break-even graph?
A shaded area between the revenue and total costs lines below the break-even point
A shaded area between the revenue and total costs lines above the break-even point
It is represented on the Y axis
What is represented on the X axis on a break-even graph?
Costs and revenue
Margin of safety
Products sold
If fixed costs are £12,000, the selling price is £5 and the variable cost is £2 per unit, what is the break-even point?
5,000 units
4,000 units
4,500 units
If the break-even point is 3,250 and the actual sales are 4,560, what is the margin of safety?
1,310 units
1,250 units
1,210 units