Business – 5.4 Costs – Break-even analysis | e-Consult
5.4 Costs – Break-even analysis (1 questions)
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Answer to Question 2
- Contribution per unit = £30 – £18 = £12.
Contribution margin ratio = (£12 ÷ £30) × 100 = 40 %.
Break‑even chart (SVG):
Units £ Total Cost Total Revenue BE (5,000) Expected (5,000) - Profit = (Expected units × Contribution) – Fixed costs = (5,000 × £12) – £60,000 = £60,000 – £60,000 = £0 (the firm just reaches break‑even at 5,000 units). The shaded area on the chart represents profit; in this case it is zero.
- Margin of safety = Expected sales – Break‑even sales = 5,000 – 5,000 = 0 units.
Percentage = (0 ÷ 5,000) × 100 = 0 %.