Business Studies – 4.4.3 Break-even analysis | e-Consult
4.4.3 Break-even analysis (1 questions)
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a) Fixed Costs: £30,000; Variable Cost: £15 per unit.
b) The total revenue at the break-even point is £30,000. The total number of units sold at the break-even point is 2,000. Therefore, the profit margin percentage is calculated as: ((Total Revenue - Total Variable Costs) / Total Revenue) * 100 = ((£30,000 - (£15 x 2,000)) / £30,000) * 100 = ( £0 / £30,000) * 100 = 0%. This means that at the break-even point, the company is neither making a profit nor a loss.
c) Tech Solutions could reduce its break-even point by:
- Reducing fixed costs: This could involve renegotiating rent, reducing administrative expenses, or finding cheaper suppliers.
- Reducing variable costs: This could involve finding cheaper materials, improving production efficiency, or negotiating better prices with suppliers.
- Increasing the selling price: If demand is elastic, a small increase in price could lead to a significant increase in sales volume.