Business – 5.4 Costs – Break-even analysis | e-Consult
5.4 Costs – Break-even analysis (1 questions)
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Break‑even calculation
| Fixed Costs (FC) | £120,000 |
| Variable Cost per Unit (VC) | £15 |
| Selling Price per Unit (SP) | £25 |
| Contribution per Unit (SP – VC) | £10 |
| Break‑even Volume (FC ÷ Contribution) | 12,000 units |
Limitation: The break‑even figure assumes that all costs and revenues remain constant, ignoring factors such as economies of scale, changes in market demand, or price fluctuations. Consequently, relying solely on this number may lead to misguided decisions if the business environment deviates from the static assumptions.