1. Break Even Analysis
All: Understand / review what is break even analysis
Most: calculate and present break even
Some: Explain how break even is an internal control

2. Break even is the point where
total revenue = total cost
There is no profit being made and no loss being made
The business is making a profit when the revenue is more than total costs
The business is making a loss when the revenue is less than the total costs

3. Why do companies need the break even figure?
The break even figure allows companies to decide what level of production and sales are needed
The information is required to support a loan application or for investors
It can help to predict changes if prices are increased or decreased.

4. There are three ways to work out the break even figure.
1. Break even formula (the quick way)
The break even point can be easily worked out without adding up the costs and revenue.
Break even formula.
fixed costs
selling price – variable costs
$400
($ $2.50) = 80 units

5. Break even calculations
How do we work out each formula?
Revenue = Price x Quantity
Fixed Cost = no calculation as it is given and doesn’t change
Variable cost = VC per unit x quantity
Total Cost = Fixed cost + Variable cost

6. Break even calculation
We will work out the break even graph together using the following three bits of information.
Selling price = $2.00
Variable cost per unit = $1.20
Fixed costs = $350
Using
Break even formula (quick)
Break even chart (analytical)
Break even graph (pretty)

7. Break Even Task Selling price -$5 Variable Cost / unit – $3.75
Fixed Cost $1750
Calculate the BE point and create a chart and graph.
Explain how this would be used as an internal control.