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 by which sales exceed the break-even point
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)
Which of these business decisions is break-even most likely to help with?
Whether to change the name of a product
What price to charge for a product
Whether to change the design of a product
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 break-even point will not change
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?
The area between the total revenue and total costs lines below the break-even point
The area between the total revenue and total costs lines above the break-even point
It is shown at the point where the total revenue and total cost lines cross
What does a straight horizontal line on a break-even graph usually represent?
Total revenue
Total costs
Fixed costs
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 units and the actual sales are 4,560 units, which of the following is true?
The business has made a loss
The business has made a profit of zero
The business has a margin of safety