3.3 Break-even analysis
Break-even: level of output at which total costs equal total revenue.
The table method
The graphical method - the break-even chart
Margin of safety: amount by which the output level exceeds the break-even level of output.
The break-even formula
Contribution per unit: selling price of a product minus direct costs per unit.
Total contribution: unit contribution x output.
Break-even revenue: amount of revenue needed to cover both fixed and variable costs so that the business breaks even.
Break-even: level of output at which total costs equal total revenue.
The table method
The graphical method - the break-even chart
Margin of safety: amount by which the output level exceeds the break-even level of output.
The break-even formula
Contribution per unit: selling price of a product minus direct costs per unit.
Total contribution: unit contribution x output.
Break-even revenue: amount of revenue needed to cover both fixed and variable costs so that the business breaks even.