Break even exam pt2 - french PDF

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Sp e c i fi c a t i o nT o p i c :Br e a k e v e n

Q1

Fill in the gaps

A business can work out how many units it needs to sell to cover its costs, known as the break-free output, using a break-even chart. The break-even occurs where total revenue are equal to total costs and at this point, the business does not make a profit or a loss. Break-even point can be used to decide whether a business proposition is worthwhile and whether it will be profitable. The margin of analysis can also be shown on a break-even chart. Choose from: safety; analysis; revenue; point; costs; profit; chart; break-even

Q2

Key terms! Explain the meaning of each of the following… 2.1 Break-even output

Break even output is the level of output in which the total revenue becomes equal to the total costs.

2.2 Margin of safety

Margin of safety is the difference between the actual sales and then the break-even sales.

Q3

True or false? Identify if each of the following statements are true or false in relation break-even analysis 3.1 If fixed costs increase and all other variables remain the same the breakeven point will increase 3.2 If variable costs decrease and all other variables remain the same the break-even point will decrease 3.3 If total costs decrease and all other variables remain the same the breakeven point will increase 3.4 If selling price is increased and all other variables remain the same the break-even point will increase 3.5 If total revenue increases and all other variables remain the same the break-even point will decrease

Q4

Identify it!

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True or false

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Costs / Revenues £s

Break-even diagram for Allsopps 6800 6400 6000 5600 5200 4800 4400 4000 3600 3200 2800 2400 2000 1600 1200 800 400 0

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200

400

600

800

1000

1200

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1600

Number of sales/units

Fixed costs

Total Costs

Sales Revenue

Using the break-even chart, identify the correct answer for each of the following statements, by circling the correct response

Q5

4.1 Fixed costs at 1,400 units

a) £1,200

b) £3,600

c) £5,600

4.2 Variable costs at 1,600 units

a) £400

b) £800

c) £1,600

4.3 Total costs at 400 units

a) £4,000

b) £4,400

c) £4,800

4.4 Total revenue at 800 units

a) £2,400

b) £3,200

c) £4,000

4.5 Break-even point

a) 1,200 units

b) 3,600 units

c) 4,800 units

4.6 Margin of safety if 1,600 units are sold

a) 400 units

b) 1,400 units

c) 2,800 units

Benefit or drawback? Identify whether each of the following statements represent a benefit or drawback of using break-even analysis to a business Benefit

Drawback

5.1 “What if” analysis can be used to see the effect of changes in selling price and costs e.g. what happens to the break-even point if the selling price is increased? ©T u t o r 2 uL i mi t e d2 0 1 7

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5.2 Easy to calculate 5.3 If a firm sells products at different prices it is difficult to use 5.4 Quick to produce 5.5 It is difficult to use when a firm sells different products 5.6 Can be shown to the bank to support an application for a loan 5.7 If the data is not accurate the break-even point will be incorrect 5.8 Predicted sales levels might not be met

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