Business- Break even analysis

What is break even

Level of output where total revenue equals total cost

What is margin of safety

How far actual output is above break even point

Advantages of break even

Helps with setting sales target, Helps calculate how many units need to sell,Helps business assess impact of change in cost and price

Disadvantages of break even

Assumes selling price remains consistent, Assumes everything produced can be sold , does not take into unexpected demand changes

What is a semi variable cost

Cost that contains both fixed and variable eg part of cost stays same no matter ouput while other part changes depending on level activity

What are direct costs

costs directly linked to producing particular product

What are overheads/indirect costs

costs that cant easily be linked to one specific product