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Budgeting and Decision Making
Quick questions on Break-even and margin of safety explained: H2 Principles of Accounting
6short Q&A pairs drawn directly from our worked dot-point answer. For full context and worked exam questions, read the parent dot-point page.
What is the break-even point?Show answer
Break-even is where total contribution equals fixed costs, so profit is zero:
What is the margin of safety?Show answer
The margin of safety is how far current or expected sales exceed break-even:
What is the break-even chart?Show answer
A break-even chart plots, against output:
What is q1?Show answer
Fixed costs are \90\,000\ per unit. Find the break-even point. [2 marks]
What is q2?Show answer
Break-even is units and budgeted sales are units. Find the margin of safety in units and percentage. [2 marks]
What is q3?Show answer
Explain what the point where the total revenue and total cost lines cross on a break-even chart represents. [2 marks]
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