Term

Definition
The level of output at which total costs equal total revenue 


Term
Breakeven analysis can be undertaken in three ways: 

Definition
Table of costs and revenues Graphical method Formula method 


Term
What are the steps in constructing a breakeven chart? 

Definition
1. Name the chart 2. Label the x (output) and y (costs and revenues) axis 3. Graph the fixed costs 4. Graph the total costs 5. Graph the sales revenues 6. Calculate: BEQ=fixed costs/contrib. per unit 7. Calculate and label the BE costs/revenues 


Term

Definition
Selling price of a product minus direct costs per unit 


Term
What are the advantages of breakeven analysis? (4) 

Definition
relatively easy to construct and interpret charts useful guidelines for management comparisons between options can be made can be used in the decision making process 


Term
What are the limitations of breakeven analysis? (6) 

Definition
costs and revenues aren't always represented by straight lines not all costs can be classified into fixed and direct costs cost and price data is often estimated static model; excludes the possibility of sudden change ignores qualitative factors prone to error 

