Business Studies Collins Revision Guide. - StudyGuide.PK

●●●●●●BREAK EVEN (3)Total costs (TC) are the total of fixed costs and variable costs.Revenue is the money coming into the business from the saleof the goods or services. It is the business’s income before anycosts are considered.Total revenue (TR) is the price of the product × quantity sold.Break even is the level of sales needed for total costs to equaltotal revenue.Break even can be worked out by either using a formula or bydrawing a graph. The formula for break even is:fixed costsprice per unit – variable cost per unitAnother name for (price per unit – variable cost per unit) is contribution.Case studyOldie Pine Ltd makes and sells reproduction pine farmhouse tables. The cost ofthe reclaimed pine is £35 per table. Wages are £15 per table. Fixed costs were£16 250 per year. The tables are sold at £115 each. Calculate the quantity oftables that must be sold to break even.Fixed costs £16 250Variable costs are £35 + £15 = £50Price per unit is £115Fixed costsPrice per unit – Variable cost per unit= £16 250£115 – £50= 250 tables per year38