Mastering Break Even Analysis

• Tourism
• Foundation Degree

Break Even Analysis

Learning Objective

Understand the concept of break-even analysis and its application in business decision-making

Carry out break even point calculations

Draw a break even chart on graph paper 

Has anyone studied break even before?

Yes

No

Components of Break-Even Analysis

Fixed costs

Variable costs

Selling price 

Definition of Break-Even Analysis

Break-even analysis is a calculation used to determine the point at which revenue received equals the costs associated with receiving the revenue.

Importance in Decision Making

Break-even analysis helps businesses in setting prices, determining the impact of cost changes, and making investment decisions.

Break-Even Point Calculation

Fixed costs

_____________

Selling price per unit - Variable cost per unit 

Graphical Representation

Break-even analysis can be visually represented through a graph, showing the intersection of the revenue and cost lines.

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Example.....

A business that sells T-shirts knows that:

Its fixed costs are £400.

The selling price (per unit) is £10.

The variable costs (per unit) are £6.

So their BEP can be calculated as:

Practice Task and Assignment Task 4