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All 25 Flashcards — Break-even concepts
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Question
Total revenue formula?
Answer
TR = Selling price × Quantity sold.
💡 Hint
Price × quantity
Question
BEP = where TR = TC (no ___, no ___)
Answer
Profit; loss.
💡 Hint
Profit + loss
Question
Break-even output = the ___ of units at BEP
Answer
Number — how many units must be sold to cover all costs.
💡 Hint
Number
Question
What are fixed costs?
Answer
Costs that stay the same regardless of output — rent, insurance, salaries, loan repayments.
💡 Hint
Same regardless of output
Question
What is the break-even point?
Answer
Where total revenue exactly equals total costs — no profit, no loss.
💡 Hint
TR = TC
Question
What are variable costs?
Answer
Costs that change with output — raw materials, packaging, direct labour per unit.
💡 Hint
Change with output
Question
Why does break-even matter?
Answer
Tells how many units must be sold to avoid a loss; helps planning; useful for business plans; evaluates price/cost changes.
💡 Hint
Min sales + planning + evaluation
Question
What is contribution per unit?
Answer
Selling price minus variable cost per unit — what each unit contributes toward fixed costs.
💡 Hint
Price − VC per unit
Question
What is the margin of safety?
Answer
Actual sales minus break-even sales — the buffer before losses start.
💡 Hint
Actual − BEP
Question
FC stay the same. VC change with ___
Answer
Output — more units = more variable costs.
💡 Hint
Output
Question
Below break-even = ___. Above break-even = ___
Answer
Below = loss. Above = profit.
💡 Hint
Loss vs profit
Question
Don't confuse contribution with profit! Contribution = ___. Profit = ___
Answer
Contribution = price − VC per unit. Profit = TR − ALL costs (FC + VC).
💡 Hint
Per unit vs total
Question
Total contribution formula?
Answer
Total contribution = Contribution per unit × Number of units sold.
💡 Hint
CPU × units
Question
Total costs formula?
Answer
TC = Fixed costs + Variable costs.
💡 Hint
FC + VC
Question
TC = FC + VC. Contribution = price − ___
Answer
Variable cost per unit.
💡 Hint
VC per unit
Question
Fixed costs must be paid even if output is ___
Answer
Zero — rent and salaries are due whether or not anything is produced.
💡 Hint
Zero
Question
Margin of safety = actual sales − ___
Answer
Break-even sales.
💡 Hint
BEP sales
Question
At break-even: Total Revenue = ___
Answer
Total Costs — exactly covering all costs, zero profit.
💡 Hint
Total Costs
Question
Once total contribution covers all fixed costs, you've hit ___
Answer
Break-even! After that point, each extra unit sold generates profit.
💡 Hint
Break-even
Question
Profit only exists ___ break-even
Answer
Above — below break-even, the business makes a loss.
💡 Hint
Above
Question
A loss occurs when ___
Answer
Total costs exceed total revenue — the business hasn't sold enough to cover costs.
💡 Hint
TC > TR
Question
Quick: Contribution is the ___ to break-even
Answer
Building block — each unit's contribution chips away at fixed costs.
💡 Hint
Building block
Question
Break-even helps new businesses because ___
Answer
It shows investors/banks the minimum sales needed — essential for business plans.
💡 Hint
Business plan tool
Question
On a graph: FC = horizontal line. VC starts at ___ and slopes ___
Answer
Origin (0,0); upwards — more output = more variable costs.
💡 Hint
Origin + upwards
Question
Price $10, VC $6. Contribution per unit = ___. FC $2000. BEP = ___
Answer
Contribution = $4. BEP = $2000 ÷ $4 = 500 units.
💡 Hint
$4; 500 units
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Break-even analysis
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