Break even

virkstyteu
Mind Map by virkstyteu, updated more than 1 year ago
virkstyteu
Created by virkstyteu over 5 years ago
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GCSE Business Mind Map on Break even, created by virkstyteu on 10/09/2014.

Resource summary

Break even
1 Fixed costs are costs that do not change with output
1.1 Rent
1.2 Salary
1.3 Insurance
1.4 Tax
2 Variable costs are costs that do change with output
2.1 Raw Materials
2.2 Phone bill
2.3 Wages/Comission
3 Break even is the point where sales are exactly the same as costs
3.1 It shows us how many things need to be sold to stop loss and start making a profit
3.2 Break even point formula; fixed costs/selling price - variable costs per unti
4 For the table and chart method, you should complete the table first; using all the different calculations. .
4.1 Once that is complete, you are ready to plot the graph using an appropriate scale. The y axis should be labelled as costs and the x axis should be labelled output
5 Important formulas to remebmber
5.1 Total revenue: Selling price per unit * Quantity sold
5.2 Total costs: fixed costs+ variable costs
6 Advantages of break even analysis
6.1 Can calculate the number of sales needed to break even
6.2 Help sets targets for the future
6.3 Can work out number of sales needed to stop loss
6.4 Can use a graph for visual representation
7 Disadvantages of break even
7.1 Assumes no stocks are being held
7.2 Doesn't consider competition
7.3 Incorrect data can produce inaccurate results
7.4 Difficult for multi-product businesses
8 Using ICT can give you a clear representation of what is needed for your business to break even
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