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| Question | Answer |
| Break-even analysis | A tool that businesses can use to determine how many sales are needed to cover all their costs. |
| Break-even point | The level of output that generates sufficient revenue to cover total costs without any profit left. BEP= Fixed cost / contribution per unit |
| Selling price | The average price paid by the customer for one unit of a product or service. |
| Variable costs per unit | Costs that vary directly with output. For example, raw materials or components needed to produce one unit of production. |
| Fixed costs | Costs, such as rent or advertising, that are not directly linked to output and so do not change as output increases or falls. |
| Contribution per unit | How much a product contributes to covering the fixed costs of a business. Contribution per unit= Selling price- variable cost per unit |
| Total contribution | How much the whole product line (all the products/services produced by the business) contributes to covering the fixed costs. Total contribution = contribution per unit x output |
| Margin of safety | The difference between the break-even point and the current level of output. It shows how far output can fall with the business still achieving break-even. MOS= Level of production- break even quantity |
| Set up costs | are for starting a business ( e.g. , fees to register the business, payments for licenses required, rental deposit for the office, payment for machinery and office equipment etc. ) |
| Operating costs | Are for day to day running of the business ( e.g. utility bills, rent, stationary, refreshments, for staff, insurance fees etc..) |
| Production costs | are for producing goods and they usually consist of materials & labour. A T-shirt manufacturer would have to buy fabric and thread - 2 raw materials used for producing basic T-shirt s. it would also need to pay its workers either on a per pice basis or an hourly basis. |
| sales revenue ( formula) | Price x quantity sold |
| Variable cost | is a cost that varies with the level of outputs or sales |
| Fixed cost | A cost that does not vary with the level of output or sales in the short run |
| Semi- variable cost | A cost that that has both a fixed component and a variable component. E.g. a car salesperson usually earns a fixed basic pay in addition to sales commission for every car that is sold. |
| Direct cost | a business expense that can be directly identified with the unit of production ( or sales) & can be allocated to a cost centre. E.g. fac |
| Indirect cost | a business expense that cannot be identified with the unit of production ( or sales) or allocated accurately to a cost centre E.g. |
| Sales revenue ( formula) | units sold x sales price |
| Gross profit (formula) | sales revenue - cost of goods sold |
| Retained profit ( formula) | net profit after interest & tax - dividends |
| Net profit after interest & tax (formula) | net profit before interest & tax - tax |
| Cost of goods sold (formula) | Unit variable cost - units sold |
| Dividends | net profit after interest & tax - retained profit |
| Net profit before interest & tax | gross profit - expenses |
| percentage change (formula) | year 2# - year 1# / year 1 # ans x 100 = X % |
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