State the formula for calculating contribution per unit.

Contribution = selling price less variable cost per unit

Calculate the contribution per unit when selling price = £139, variable cost per unit = £109.

Contribution per unit = 139 − 109 = £30.

What does contribution represent in business terms?

Contribution represents the amount each unit sold contributes towards covering fixed costs and then generating profit.

Define the break-even point in terms of costs and revenue.

The break-even point is where total fixed costs plus total variable costs equals total revenue.

What profit or loss does a business make at the break-even point?

At the break-even point, a business makes neither a profit nor a loss.

State the formula for calculating break-even output in units.

Break-even Output = Total Fixed Costs ÷ Contribution per Unit

Edexcel A-Level Business 9BS0

Meeting Customer Needs

Topic overview The market Market research Market positioning

The Market

Topic overview Demand Supply Markets Price elasticity of demand Income elasticity of demand

Marketing Mix and Strategy

Topic overview Product/service design Branding and promotion Pricing strategies Distribution Marketing strategy

Managing People

Topic overview Approaches to staffing Recruitment, selection and training Organisational design Motivation in theory and practice Leadership

Entrepreneurs and Leaders

Topic overview Role of an entrepreneur Entrepreneurial motives and characteristics Business objectives Forms of business Business choices Moving from entrepreneur to leader

Raising Finance

Topic overview Internal finance External finance Liability Planning

Financial Planning

Topic overview Sales forecasting Sales, revenue and costs Break-even Budgets

Managing Finance

Topic overview Profit Liquidity Business failure

Resource Management

Topic overview Production, productivity and efficiency Capacity utilisation Stock control Quality management

External Influences

Topic overview Economic influences Legislation The competitive environment

Business Objectives and Strategy

Topic overview Corporate objectives Theories of corporate strategy SWOT analysis Impact of external influences

Business Growth

Topic overview Growth Mergers and takeovers Organic growth Reasons for staying small

Decision-Making Techniques

Topic overview Quantitative sales forecasting Investment appraisal Decision trees Critical Path Analysis

Influences on Business Decisions

Topic overview Corporate influences Corporate culture Shareholders versus stakeholders Business ethics

Assessing Competitiveness

Topic overview Interpretation of financial statements Ratio analysis Human resources

Managing Change

Topic overview Causes and effects of change Key factors in change Scenario planning

Globalisation

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Global Markets and Business Expansion

Topic overview Conditions that prompt trade Assessment of a country as a market Assessment of a country as a production location Reasons for global mergers or joint ventures Global competitiveness

Global Marketing

Topic overview Marketing Niche markets Cultural/social factors

Global Industries and Companies

Topic overview The impact of MNCs Ethics Controlling MNCs

Financial Planning

Break-even

7 things to know
Paper 2 and Paper 3

Overview

Contribution per unit, the break-even calculation and chart, the margin of safety, and how a change in price or cost moves the break-even point.

What you need to know

Answer each one before you reveal it.

Your recallNot started

Numbers

What is contribution, and what is the break-even point?

Numbers

How is break-even output calculated?

Numbers

What is the margin of safety, how is it calculated, and what happens to it if break-even output rises?

Numbers

What does the area between total revenue and total costs to the left of the break-even point represent?

Numbers

Why is break-even analysis described as a simplified static model?

Numbers

State the contribution-per-unit formula.

Numbers

State the break-even-output formula.

Questions from this subtopic

Each one with the model answer underneath.

1
State the formula for calculating contribution per unit.
Model answer
Contribution = selling price less variable cost per unit
2
Calculate the contribution per unit when selling price = £139, variable cost per unit = £109.
Model answer
Contribution per unit = 139 − 109 = £30.
3
What does contribution represent in business terms?
Model answer
Contribution represents the amount each unit sold contributes towards covering fixed costs and then generating profit.
4
Define the break-even point in terms of costs and revenue.
Model answer
The break-even point is where total fixed costs plus total variable costs equals total revenue.
5
What profit or loss does a business make at the break-even point?
Model answer
At the break-even point, a business makes neither a profit nor a loss.
6
State the formula for calculating break-even output in units.
Model answer
Break-even Output = Total Fixed Costs ÷ Contribution per Unit

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