5.5.4BM20 flashcards

Changes affecting break-even

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Card 1 of 205.5.4

5.5.4

Question

FC increase → TC line shifts ___. BEP ___

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All 20 Flashcards — Changes affecting break-even

Card 1concept

Question

FC increase → TC line shifts ___. BEP ___

Answer

UP (parallel). BEP increases — need to sell more.

💡 Hint

Up + BEP increases

Card 2concept

Question

Price increase → TR line becomes ___. BEP ___

Answer

Steeper (more revenue per unit). BEP decreases. But may lose customers!

💡 Hint

Steeper + BEP down

Card 3concept

Question

Name three limitations of break-even analysis

Answer

Assumes all output sold, assumes costs purely fixed/variable, assumes constant price, single product only, static model.

💡 Hint

All sold + pure costs + one price + one product

Card 4concept

Question

FC up → TC shifts UP → BEP ___

Answer

Increases.

💡 Hint

Increases

Card 5concept

Question

Why is 'assumes all output is sold' a limitation?

Answer

In reality, not everything sells — unsold stock means actual revenue is lower than predicted.

💡 Hint

Unsold stock

Card 6concept

Question

Price decrease → TR line becomes ___. BEP ___

Answer

Flatter (less revenue per unit). BEP increases. But may attract more customers!

💡 Hint

Flatter + BEP up

Card 7concept

Question

VC increase → TC line becomes ___. BEP ___

Answer

Steeper (starts same, rises faster). BEP increases — contribution falls.

💡 Hint

Steeper + BEP increases

Card 8concept

Question

VC up → TC STEEPER → BEP ___

Answer

Increases.

💡 Hint

Increases

Card 9concept

Question

Why is 'single product only' a limitation?

Answer

Most businesses sell multiple products at different prices — break-even can't handle this complexity.

💡 Hint

Multiple products

Card 10concept

Question

Price up → TR STEEPER → BEP ___

Answer

Decreases.

💡 Hint

Decreases

Card 11concept

Question

Price up → BEP down. Price down → BEP ___

Answer

Up — lower contribution per unit means more units needed to break even.

💡 Hint

Card 12concept

Question

FC change = TC shifts up/down (parallel). VC change = TC changes ___

Answer

Gradient (steepness) — different effects on the chart.

💡 Hint

Gradient

Card 13concept

Question

When discussing price changes, always consider ___

Answer

Both the numbers (BEP change) AND the impact on demand (customers' response).

💡 Hint

Numbers + demand

Card 14concept

Question

Mentioning limitations in exams shows ___

Answer

Critical thinking — can push answers into the top mark band.

💡 Hint

Critical thinking

Card 15concept

Question

Price down → TR FLATTER → BEP ___

Answer

Increases.

💡 Hint

Increases

Card 16example

Question

Rent goes up → which line moves? How?

Answer

TC shifts upward (parallel) — FC increased so whole line moves up.

💡 Hint

TC shifts up

Card 17concept

Question

Quick: Break-even limitations include assumes all sold, single product, constant ___

Answer

Prices — in reality businesses use discounts and change prices.

💡 Hint

Prices

Card 18concept

Question

Break-even is a ___ model — doesn't account for ___

Answer

Static; changes over time.

💡 Hint

Static + no time changes

Card 19example

Question

Raw materials cost more → which line changes? How?

Answer

TC becomes steeper — VC per unit increased so gradient increases.

💡 Hint

TC steeper

Card 20concept

Question

Price up → TR steeper → BEP lower. Price down → TR ___ → BEP ___

Answer

Flatter; higher.

💡 Hint

Flatter + higher

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Break-even analysis

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