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This lesson will be about... BREAKEVEN

This lesson will be about... BREAKEVEN. What is Sales Revenue?. NO IDEA I NEED HELP NEVER HEARD OF IT. OK I CAN DO THIS WITH SUPPORT SOME GUIDANCE NEEDED NEARLY AT MY TARGET. GOT IT! VERY CONFIDENT WILL HIT MY TARGET GRADE. EXCEED TARGET. LEARNING OBJECTIVES

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This lesson will be about... BREAKEVEN

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  1. This lesson will be about...BREAKEVEN What is Sales Revenue?

  2. NO IDEA I NEED HELP NEVER HEARD OF IT OK I CAN DO THIS WITH SUPPORT SOME GUIDANCE NEEDED NEARLY AT MY TARGET GOT IT! VERY CONFIDENTWILL HIT MY TARGET GRADE EXCEED TARGET LEARNING OBJECTIVES Explore breakeven and how to shift the breakeven point

  3. GLUE Key Terms* • Break Even:Number of units that must be sold in order to produce a profit of zero (but will recover all associated costs).(Break Even = Fixed Cost / contribution per unit) • Profit (or Loss):The monetary gain (or loss) resulting from revenues after subtracting all associated costs. (Total Revenue - Total Costs) • Contribution The contribution is the amount of income less direct costs. (Contribution Cost = Unit Price - Variable Unit Cost) • Revenue (Unit Sales * Unit Price ) • Margin of safety shows how far sales can fall before losses made.

  4. Break even analysis depends on the following variables • The fixed costs for a product. • The variable costs for a product. • The product's unit price. • The product's expected unit sales [sometimes called projected sales.]

  5. Watch Co.

  6. The Formula • Contribution = Unit Price - Variable Unit Cost • Break Even = Fixed Cost / Contribution • Break Even = 2500/(85-20) [38.5]

  7. Break even Chart Calculator • Question: • Restaurant Sells 600 meals at $24 each. The meals cost $8 each to prepare. The restaurant also pays fixed costs of $8500. • Calculate Breakeven.

  8. Question • Restaurant Sells 600 meals at $24 each. The meals cost $8 each to prepare. The restaurant also pays fixed costs of $8500. • Calculate Breakeven.

  9. Answer • Restaurant Sells 600 meals at $24 each. The meals cost $8 each to prepare. The restaurant also pays fixed costs of $8500. • BREAKEVEN Fixed costs = 8500 / (24 – 8) =531.25 (so this restaurant would need to sell and prepare 532 meals to breakeven. Why 532 not 531?

  10. http://www.youtube.com/watch?v=TLOo2mY6FIw How to draw a breakeven chart

  11. Copy & label in your books ? ? ? ? Fixed costs, breakeven, sales, variable costs, output, quantity ? ?

  12. What factors can cause a shift in the break even point?

  13. Why is it important that we keep an eye on our Breakeven point?

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