Edexcel Business - Paper 2 Summer
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Break-even analysis 
- A method of determining what sales volume must be reached before total revenue equals total cost 
Break-even formula 
break-even = total fixed costs / contribution per unit 
Contribution per unit formula 
contribution = selling price - variable cost 
Break-even analysis pros and cons 
Pros: 
- Useful for management, predicts break-even output, margin of safety, and estimate profits at different levels 
- Highlights the importance of fixed costs, lower fixed costs = lower b...
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Break-even analysis 
- A method of determining what sales volume must be reached before total revenue equals total cost 
Break-even formula 
break-even = total fixed costs / contribution per unit 
Contribution per unit formula 
contribution = selling price - variable cost 
Break-even analysis pros and cons 
Pros: 
- Useful for management, predicts break-even output, margin of safety, and estimate profits at different levels 
- Highlights the importance of fixed costs, lower fixed costs = lower b...