Reference no: EM132678872

The following information relates to a company, which produces a single product.

Direct labour per unit $ 22

Direct materials per unit $ 12

Variable overheads per unit $ 6

Fixed costs $ 400,000

Selling price per unit $ 60

Question 1: Define the term 'break-even'.

Question 2: Explain why break-even analysis is of reduced value to a multi-product firm?

Question 3: Use the figures above to construct a break-even chart showing the minimum number of units that must be sold for the company to break even. Fully label your diagram.

Question 4: Analyse the factors that any business should take into consideration before using break-even analysis as a basis for decision making.