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Break Even Formula

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Break Even Formula Powered By Docstoc
					                                     Calculating break even

                    0          20         40      60        80        100

Fixed Cost          100        100        100     100       100       100

Variable Cost       0          15         30      45        60        75

Total Cost          100        115        130     145       160       175




Total Sales         0          60         120     180       240       300

(Variable Cost = £0.75 per product; Total sales = £3 per product)



Stage 1: Draw and label the scales for the graph


                  300
                  280
                  260
                  240
                  220     THE CUSTOMER
    Cost/Income




                  200
                  180
                  160     What is the difference between a need and a wa
                  140
                  120
                  100
                   80
                   60
                   40
                   20
                    0

                          0      20       40     60      80        100
                                           Quantity sold
Stage 2: Plot the fixed cost line

                  300
                  280
                  260
                  240
                  220
    Cost/Income




                  200
                  180
                  160
                  140
                  120
                  100
                   80
                   60
                   40
                   20
                    0

                        0   20         40     60      80   100
                                        Quantity sold


Stage 3: Include the total cost line
Stage 4: Add the sales revenue line




Break even point = 44 products

Formula:

Break even =            fixed cost         .
               Selling price – variable cost


           =      £100             =    £100
               (£3 - £0.75)             £2.25

           = 44

Stage 5: Analyse the chart

				
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