CVP & Breakeven

Question	Answer
At the breakeven point how much profit do we make?	0 profit.
Sales = what at breakeven?	Sales = All Costs at breakeven
CM = what at breakeven?	CM = FC at breakeven Contribution Margin = Fixed Costs
All Costs = ...	Total FC + Total VC
What is the breakeven point?	How many sales we need to generate to cover our costs.
What is breakeven in units?	FC/UCM Fixed Costs/Unit Contribution Margin
UCM =	SP - VC/Unit
What is breakeven in $?	(FC/UCM) x SP
What is breakeven + desired level of profit in units?	(FC + Profit)/UCM
What is breakeven + desired level of profit in $?	(FC + Profit/UCM) x SP
Whether it is a manufacturing cost or not...	STILL INCLUDE it in CVP analysis.
Always round up for units in what?	Break-even
What is operating leverage?	The mix of FC & VC within the cost structure.
Having higher fixed costs means...	There is a higher operating leverage hence there is more risk within the cost structure.
Why is a high operating leverage risky?	Because a higher FC results in a higher CM hence you need to sell more product to ensure you reach BE + profit.
What is a margin of safety?	The excess above breakeven based on current operations.

Resource summary

	Created by Sophia Lynch almost 4 years ago