Starter What’s the story? Title: Break-Even.

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Presentation transcript:

Starter What’s the story? Title: Break-Even

Calculations! A factory making plastic chairs has maximum capacity of 10,000 units per year. It has fixed costs of £12,000. Selling price per unit is £8 Variable cost per unit is £4

Contribution

Contribution Contribution per unit = selling price – variable costs per unit Calculate the contribution per unit for the factory making plastic chairs. Calculate the total contribution when at maximum capacity for the factory making plastic chairs. Total Contribution = contribution per unit x number of units sold

Break-Even Point Break-Even Point = fixed costs/contribution per unit Calculate the break-even point for the factory making plastic chairs.

Margin of Safety = actual sales – break-even level of output Calculate the margin of safety when at maximum capacity for the factory making plastic chairs.

Time to Break-Even? Months to break-even = break-even units/units produced per month Calculate the break-even time for the factory making plastic chairs. *units produced per month = maximum units per year/12 months

Exam Questions

Exam Questions