Breakeven charts Step by Step

Step one Find your 4 key pieces of info Fixed Costs Selling Price Variable Costs Forecast Output Write these on the top of your workings page. No matter how long winded the question is, you are always looking for these 4 pieces of info!

Step two Find your Break-Even Point in units and €’s using this simple formula. FC __________ = ???? units SP – VC x SP = €???? SP-VC is called contribution per unit. Don’t let this confuse you in text books or exam questions!

Forecast Output x SP = €€€€ Step three Find your Forecast Output both in units and € Forecast Output x SP = €€€€ These figures will tell you have far to go on the x-axis (units) and the y-axis (€) When plotting, you must find multiples of the breakeven point.

X axis is output in units, this goes as far as your forecast output. Step four Draw your graph! Y axis is costs and revenue €, this goes as high as your forecast sales in € X axis is output in units, this goes as far as your forecast output. They must fit in multiples of the break even point. Join the highest and farthest point with a broken line.

Were they meet is the BEP Step five Mark your breakeven point with the figures from your formula. Its like a multiplication square. Find you BEP in € and in units. Were they meet is the BEP Draw a dotted line from BEP to units axis. It is marked as a bullet point

Step six Draw your fixed cost line from the € axis all the way to the forecast output line.

Total costs from fixed cost line Step seven Draw your total cost line from the fixed cost line, through the BEP and touching the forecast output line. Draw the total revenue line from the 0,0 point, through the BEP and touching the forecast output line. Total costs from fixed cost line

Step eight Identify margin of safety Label and mark it. Margin of safety is the area between the BEP and the forecast output line.

The middle area is the Profit at Full Capacity Step nine Identify your profit at full capacity. Label and mark it. Label it with the name AND figures. To find it, you must draw a line between point of Intersection from TR line and Y axis, and from TC line and Y axis. The middle area is the Profit at Full Capacity

Step Ten Label EVERYTHING! Name your chart e.g. Breakeven chart for Blah blah blah LTD. Draw your key at the top e.g BEP – Breakeven Point Name x and y axis Identify 0,0

Let’s put these steps into practice with these figures: Fixed costs: €200,000 Variable Costs: €5 per unit Selling price: €15 per unit Forecast output: 30,000