I saw this on one of the mocks, and I totally didn’t know what it was. What is the formula? How do we interpret it? Many thanks in advance
I guessed it as total breakeven and I guessed right. Its just: (Fixed Costs + Interest)/(P-V)
I can see from the answer: (F+C) / (P-V) I’m not even sure what some of those letter mean… F = C = P = V = ?
Ah, I know this one. It’s mentioned in reading 28. It is basically the quantity Q of units a company must sell at price P with fixed costs F (e.g. building lease) and variable costs V and financial costs (debt) C so that revenues = costs. Q = (F + C) / (P - V) You get to this by following these steps: 1. revenue = costs 2. (Q x P) = (Q x V) + F + C 3. (Q x P) - (Q x V) = F + C 4. Q(P - V) = F + C 5. Q = (F + C) / (P - V) Cheers
wow I’m gonna have to study that tomorrow when I have more energy