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All 25 Flashcards — Break-even calculations
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Question
BEP = FC ÷ ___
Answer
Contribution per unit (price − VC per unit).
💡 Hint
CPU
Question
Margin of safety formula?
Answer
MoS = Actual (or estimated) sales − Break-even output.
💡 Hint
Actual − BEP
Question
Target profit output formula?
Answer
Output = (Fixed costs + Target profit) ÷ Contribution per unit.
💡 Hint
(FC + target) ÷ CPU
Question
Profit formula (two versions)?
Answer
Profit = TR − TC. OR: Profit = Total contribution − Fixed costs.
💡 Hint
TR−TC or TotContrib−FC
Question
Break-even output formula?
Answer
BEP = Fixed costs ÷ Contribution per unit.
💡 Hint
FC ÷ CPU
Question
BEP 1000, actual sales 1500. MoS = ___
Answer
1500 − 1000 = 500 units — sales could drop by 500 before losses start.
💡 Hint
500 units
Question
FC $20k, target profit $10k, CPU $20. Output needed?
Answer
($20k + $10k) ÷ $20 = 1,500 units.
💡 Hint
1,500 units
Question
FC $20k, price $50, VC $30. BEP?
Answer
CPU = $50−$30 = $20. BEP = $20,000 ÷ $20 = 1,000 units.
💡 Hint
1,000 units
Question
MoS = actual sales − ___
Answer
Break-even output.
💡 Hint
BEP
Question
1500 units × $50, VC $30, FC $20k. Profit?
Answer
TR=$75k. TVC=$45k. TC=$65k. Profit=$75k−$65k = $10,000.
💡 Hint
$10,000
Question
Shortcut profit method?
Answer
CPU ($20) × units (1500) = $30k contribution − FC ($20k) = $10k profit. Same answer!
💡 Hint
Contribution shortcut
Question
Target price questions require you to ___
Answer
Work backwards: total costs + target profit = required revenue. Then price = revenue ÷ units.
💡 Hint
Work backwards
Question
Profit = TR − TC, or Total contribution − ___
Answer
Fixed costs.
💡 Hint
FC
Question
A small margin of safety is ___ because ___
Answer
Risky — a small drop in sales could push the business into a loss.
💡 Hint
Risky + vulnerable
Question
Always show your working because ___
Answer
Even if the final number is wrong, you can earn method marks.
💡 Hint
Method marks
Question
Required price = (TC + target profit) ÷ ___
Answer
Number of units expected to be sold.
💡 Hint
Units
Question
Contribution per unit formula?
Answer
CPU = Selling price − Variable cost per unit.
💡 Hint
Price − VC
Question
A large margin of safety means ___
Answer
Comfortable buffer — the business can absorb a significant sales drop and still profit.
💡 Hint
Comfortable buffer
Question
Loss occurs when ___
Answer
Total costs exceed total revenue — business sold below break-even.
💡 Hint
TC > TR
Question
Target output = (FC + target profit) ÷ ___
Answer
Contribution per unit.
💡 Hint
CPU
Question
Negative profit means ___
Answer
A loss — the business needs to sell more, cut costs or raise prices.
💡 Hint
Loss
Question
MoS tells you how far sales can ___ before ___
Answer
Drop; the business starts making a loss.
💡 Hint
Drop; loss
Question
BEP tells you the ___ number of units to sell to cover ___
Answer
Minimum; all costs (both fixed and variable).
💡 Hint
Minimum; all costs
Question
Quick: ALWAYS show working for ___ marks
Answer
Method marks — partial credit even if final answer is wrong.
💡 Hint
Method
Question
Target questions test your ability to ___
Answer
Read carefully, identify what you know and need to find, then work step by step.
💡 Hint
Step by step
Read the notes
Full study notes for Break-even calculations
Topic 5.5 hub
Break-even analysis
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