1. Calculate Break Even Point
Principles of Cost Analysis and Management
Show Slide #1: Calculate Break Even Point
Title: Calculate Break Even Point
References: FM 1-06 Financial Management Operations, Lesson Created Handout, Notes and Template.
Section I. Administrative Data
Academic Hours/Methods
01 hrs. / 20 min. DSL (large or small group discussion)
00 hrs. / 30 min. PE (practical exercise (Hands On)
00 hrs. / 00 min. Test
00 hrs. / 00 min. Test Review
00 hrs. / 00 min. Total Hours
Section II. Introduction:
Method of Instruction: DSL (large or small group discussion)
Facilitator's to Learner Ratio: 1:25
Time of Instruction: 00 hrs. / 10 min.
Media: PowerPoint Presentation
Motivator (Concrete Experience 5 minutes): Discuss with Learners by asking a series of questions relating to “How do Non-Appropriated Funded organizations balance User Fees and Costs?” Ask Learners what their thoughts are and facilitate a short discussion.
What variables must be managed?
What if Cost > User Fees?
What if User Fees > Cost?
If Costs > User fees the manager may be subject to the provisions of the Anti-Deficiency Act. (Fine, imprisonment, or both)
If User Fees > Costs the manager may be accused of overcharging the customer.
Facilitator's Material: Each primary Facilitator should possess a lesson plan, slide deck, course handouts, practical exercise with answer key, excel template, case studies and summary sheet containing FM 1-06.
Learner’s Material: Learners should possess course handouts, practical exercises, summary sheet containing FM 1-06, case studies, excel template with access to Bb and standard classroom supplies.
Note: "All required references and technical manuals will be provided by the School House“

2. Terminal Learning Objective
Action: Calculate Break Even Point
Condition: FM Leaders in a classroom environment working individually and as a member of a small group, using doctrinal and administrative publications, self-study exercises, personal experiences, practical exercises, handouts, and discussion.
Standard: With at least 80% accuracy (70% for international Learners):
Identify Assumptions Underlying Break Even Analysis
Identify Key Variables in Break Even Equation from Scenario
Conduct Problem Demonstration Exercises for Key Variable, Contribution Margin and Break Even Points.
Show Slide #2: Terminal Learning Objective
Facilitator’s Note: Read TLO
Action: Calculate Break Even Point
Condition: FM Leaders in a classroom environment working individually and as a member of a small group, using doctrinal and administrative publications, self-study exercises, personal experiences, practical exercises, handouts, and discussion.
Standard: With at least 80% accuracy (70% for international Learners):
Identify Assumptions Underlying Break Even Analysis
Identify Key Variables in Break Even Equation from Scenario
Conduct Problem Demonstration Exercises for Key Variable, Contribution Margin and Break Even Points.
Safety Requirements: In a training environment, leaders must perform a risk assessment in accordance with DA PAM , Risk Management. Leaders will complete a DD Form 2977 DELIBERATE RISK ASSESSMENT WORKSHEET during the planning and completion of each task and sub-task by assessing mission, enemy, terrain and weather, troops and support available-time available and civil considerations (METT-TC). Local policies and procedures must be followed during times of increased heat category in order to avoid heat related injury. Consider the work/rest cycles and water replacement guidelines IAW TRADOC Regulation
Risk Assessment Level: Low.
Environmental Considerations: Environmental protection is not just the law but the right thing to do. It is a continual process and starts with deliberate planning. Always be alert to ways to protect our environment during training and missions. In doing so, you will contribute to the sustainment of our training resources while protecting people and the environment from harmful effects. Refer to FM Environmental Considerations and GTA ENVIRONMENTAL-RELATED RISK ASSESSMENT.
Evaluation: Students will take the Principles of Cost Analysis and Management 2 Exam at the end of Week Two. Students must score 80% or higher and International officers must score 70% or higher.
Instructional Lead in: Go to next screens for a quick instructional lead-in for the learner’s.

3. What is Break Even? The Point at which Revenues = Costs
Revenues above the breakeven point result in profit
Revenues below the breakeven point result in loss
May be measured in units of output or revenue dollars
Represents a “Reality Check”
Is this level of revenue reasonable?
If not, what actions would yield a reasonable breakeven point?
Show Slide #3: What is Break Even?
Instructional Lead-in: What is Break Even?
Facilitator’s Note: Start out with three quick questions to the learners;
What is Break Even?
What is its purpose?
Why should we learn it?
Answers:
The Point at which Revenues = Costs
Revenues above the breakeven point result in profit
Revenues below the breakeven point result in loss
May be measured in units of output or revenue dollars
Represents a “Reality Check”
Is this level of revenue reasonable?
If not, what actions would yield a reasonable breakeven point?
Instructional Lead in: Continue on next screen

4. Review Cost Terminology
Fixed Costs - Costs that do not change in total with the volume produced or sold
Variable Costs - Costs that change in direct proportion with the volume produced or sold
Mixed Costs - A combination of fixed and variable costs
Semi-variable Cost - Costs that change with volume produced, but not in direct proportion
Fixed Costs - Costs that do not change in total with the volume produced or sold
Variable Costs - Costs that change in direct proportion with the volume produced or sold
Mixed Costs - A combination of fixed and variable costs
Semi-variable Cost - Costs that change with volume produced, but not in direct proportion
Fixed Costs - Costs that do not change in total with the volume produced or sold
Variable Costs - Costs that change in direct proportion with the volume produced or sold
Mixed Costs - A combination of fixed and variable costs
Semi-variable Cost - Costs that change with volume produced, but not in direct proportion
Fixed Costs - Costs that do not change in total with the volume produced or sold
Variable Costs - Costs that change in direct proportion with the volume produced or sold
Mixed Costs - A combination of fixed and variable costs
Semi-variable Cost - Costs that change with volume produced, but not in direct proportion
Fixed Costs - Costs that do not change in total with the volume produced or sold
Variable Costs - Costs that change in direct proportion with the volume produced or sold
Mixed Costs - A combination of fixed and variable costs
Semi-variable Cost - Costs that change with volume produced, but not in direct proportion
Show Slide #4: Review Cost Terminology
Instructional Lead-in: (Continue) Review Cost Terminology
Facilitator’s Note: Review Terminology
1st Mouse Click View:
Fixed Costs - Costs that do not change in total with the volume produced or sold.
Total fixed costs are represented on a graph by a horizontal line.
Fixed costs per unit will decrease as number of units increase.
2nd Mouse Click View
Variable Costs - Costs that change in direct proportion with the volume produced or sold.
Variable costs are represented on a graph by an upward sloping line.
Variable cost per unit remains the same regardless of the number of units produced or sold.
3rd Mouse Click View:
Mixed Costs - A combination of fixed and variable costs
4th Mouse Click View:
Semi-variable Cost - Costs that change with volume produced, but not in direct proportion
Facilitator’s Note: Transition straight into LSA #1, Identify Assumptions Underlying Break Even Analysis

5. Identify Assumptions
The following are implied in the simple breakeven equation:
A single product or service
Clearly segregated fixed and variable costs
Variable costs are linear on a per-unit basis
If analyzing multiple products is desired:
Use “$1 of Revenue” as the Unit -or-
Use a weighted average unit
Show Slide #5: Identify Assumptions
1. Learning Step Activity 1: Identify Assumptions Underlying Break Even Analysis
Method of Instruction: DSL (large or small group discussion)
Facilitator's to Learner Ratio: 2:25
Time of Instruction: 00 hrs. / 10 min.
Media: Power Point, Printed Reference Material
21st Century Soldier Competencies: The 21st Century Soldier Competencies are essential to ensure Soldiers and leaders are fully prepared to prevail in complex, uncertain environments. Throughout the lesson discussions, seek opportunities to link the competencies with the lesson content through the Learner’s experiences.
Facilitator's Note: Before facilitating this lesson, ask the Learners which of the 21st Century Soldier Competency do they think pertain to this lesson? Facilitate a discussion on the answers given and at the end of the lesson revisit it and see if the Learners still believe their choice are the same.
Note: For this lesson these competencies should be talked about.
#6. Communication and engagement (oral, written, and negotiation)
#7. Critical thinking and problem solving
#8. Cultural and joint, interagency, intergovernmental, and multinational competence
#9. Tactical and technical competence (full spectrum capable)
Facilitator’s Note: Transition into lesson
Step 1 Identify Assumptions:
Assumptions are necessary to simplify the analysis. There may be additional variables that can only serve to confuse and overly complicate the analysis. Cost-Benefit and Materiality constraints guide us to identify only a few key variables.
The assumptions that permit us to do this are:
We analyze only one product or service. (If that assumption is not reasonable, use sales dollars or a weighted average unit as the unit of measure. Sales mix will be addressed in the lesson on Indifference Points.)
Fixed and variable costs are clearly segregated. If that is not the case, you may need to first apply high-low method to separate a mixed cost. (See the lesson on Identifying Cost Relationships)
Variable costs are linear on a per-unit basis. That is, we assume costs are truly variable per-unit, and not some form of semi-variable cost. If, in reality, the costs are semi-variable, use high-low method to determine the average variable cost per unit.
Note: Re-state that Sales Dollars will be used as the unit of measure if multiple products are assumed.

6. LSA #1 Check on Learning
Q1. Why do we need assumptions? A1. To simplify the analysis, following the Cost-Benefit and Materiality Constraints. Q2. How many products do we use in breakeven analysis? A2. Only one. Multiple products can overly complicate the analysis.
Show Slide #6: LSA #1 Check on Learning
Facilitator's Note: Ask check on learning question, facilitate discussion on answers given.
Q1. Why do we need assumptions?
A1. To simplify the analysis, following the Cost-Benefit and Materiality Constraints.
Q2. How many products do we use in breakeven analysis?
A2. Only one. Multiple products can overly complicate the analysis.
Facilitator’s Note: If time allowed, ask the following two questions.
1. Which type of cost remains the same in total when units produced or sold increases?
2. Which type of cost remains the same per unit when units produced or sold increases?

7. LSA #1 Summary LSA #1 summary will be given upon completion of LSA#4.
Show Slide #7: LSA #1 Summary
Facilitator's Note: LSA #1 summary will be given upon completion of LSA#3.

8. The Breakeven Equation
Revenue – Costs = Profit
Revenue - Variable Cost - Fixed Cost = Profit
Breakeven Point is where Profit = 0
Revenue - Variable Cost - Fixed Cost = 0
Revenue = Variable Cost + Fixed Cost
Revenue = #Units Sold * Selling Price $/Unit
Variable Cost = #Units Sold * Variable Cost $/Unit
Revenue – Costs = Profit
Revenue - Variable Cost - Fixed Cost = Profit
Breakeven Point is where Profit = 0
Revenue - Variable Cost - Fixed Cost = 0
Revenue = Variable Cost + Fixed Cost
Revenue – Costs = Profit
Revenue - Variable Cost - Fixed Cost = Profit
Revenue – Costs = Profit
Show Slide #8: The Breakeven Equation
2. Learning Step Activity 2: Identify Key Variables in Break Even Equation from Scenario
Method of Instruction: DSL (large or small group discussion)
Facilitator's to Learner Ratio: 2:25
Time of Instruction: 00 hrs. / 15 min.
Media: Power Point, Printed Reference Material
Step 2 Identify the key variables in the breakeven equation.
The breakeven equation is based on the income statement equation: Revenues – Operating Costs = Profit
1st Mouse Click View:
Operating costs can be divided into two components: Variable and Fixed
2nd Mouse Click View
Breakeven point is where profit equals zero, or Revenue – VC – FC = Profit.
Memorization is not emphasized in this course, but if you want to memorize a formula, this is the one to memorize. All breakeven formulas used in accounting textbooks are derived from this one equation.
Breakeven Point is where Profit = 0 or Revenue – VC – FC = 0
Another way of stating this is that Revenue = VC + FC
3rd Mouse Click View:
Revenue = #Units Sold * Selling Price $/Unit
Variable Cost = #Units Sold * Variable Cost $/Unit

9. Graphic Depiction of Breakeven
Show Slide #9: Graphic Depiction of Breakeven
Facilitator’s Note: Step 2 Identify the key variables in the breakeven equation. (Cont.)
Facilitator’s Note: Identify the lines on the graph.
Units Sold

10. Graphic Depiction of Breakeven (Cont.)
Show Slide #10: Graphic Depiction of Breakeven (Cont.)
Facilitator’s Note: Step 2 Identify the key variables in the breakeven equation. (Cont.)
Facilitator’s Note: Identify the lines on the graph.
The purple line represents revenue.
Revenue when zero units are sold is zero dollars.
Units Sold

11. Graphic Depiction of Breakeven (Cont.)$
Show Slide #11: Graphic Depiction of Breakeven (Cont.)
Facilitator’s Note: Step 2 Identify the key variables in the breakeven equation. (Cont.)
Facilitator’s Note: Identify the lines on the graph
The blue line represents fixed cost.
FC, by definition, remains the same regardless of number of units sold
Units Sold

12. Graphic Depiction of Breakeven (Cont.)$
Show Slide #12: Graphic Depiction of Breakeven (Cont.)
Facilitator’s Note: Step 2 Identify the key variables in the breakeven equation. (Cont.)
Facilitator’s Note: Identify the lines on the graph
The green line represents total cost, which is the sum of VC and FC.
Units Sold

13. Graphic Depiction of Breakeven (Cont.)$
Show Slide #13: Graphic Depiction of Breakeven (Cont.)
Facilitator’s Note: Step 2 Identify the key variables in the breakeven equation. (Cont.)
Facilitator’s Note: Identify the lines on the graph
The Point at which Total Cost and Revenue intersect (are equal) is the point at which profit = zero
Units Sold

14. Graphic Depiction of Breakeven (Cont.)$
Show Slide #14: Graphic Depiction of Breakeven (Cont.)
Facilitator’s Note: Step 2 Identify the key variables in the breakeven equation. (Cont.)
Facilitator’s Note: Identify the lines on the graph
Revenue above the breakeven point results in profit (represented by the green shaded area)
Units Sold

15. Graphic Depiction of Breakeven (Cont.)$
Show Slide #15: Graphic Depiction of Breakeven (Cont.)
Facilitator’s Note: Step 2 Identify the key variables in the breakeven equation. (Cont.)
Facilitator’s Note: Identify the lines on the graph
Revenue below the breakeven point results in loss (represented by the red shaded area)
Units Sold

16. LSA #2 Check on Learning
Q1. How is the breakeven equation expressed? A1. Revenue – Cost = Profit Q2. Which variables are represented on the graph by upward sloping lines? A2.: Total Cost, Variable Cost and Revenue
Show Slide #16: LSA #2 Check on Learning
Facilitator’s Note: Ask check on learning question, facilitate discussion on answers given.
Q1. How is the breakeven equation expressed?
A1. Revenue – Cost = Profit
Q2. Which variables are represented on the graph by upward sloping lines?
A2. Total Cost, Variable Cost and Revenue

17. LSA #2 Summary LSA #2 summary will be given upon completion of LSA#4.
Show Slide #17: LSA #2 Summary
Facilitator's Note: LSA #2 summary will be given upon completion of LSA#3.

18. Sample Problem
The following costs are incurred per show at Sebastian’s Dinner Theater:
Facilities cost $500
Staff (actors who double as servers) 1000
Kitchen staff
Stage crew
Food cost (per ticket)
Ticket Price is $30
Task: Calculate Breakeven number of tickets.
Show Slide #18: Sample Problem
3. Learning Step Activity 3: Conduct Problem Demonstration Exercises for Key Variable, Contribution Margin and Break Even Points.
Method of Instruction: DSL (large or small group discussion)
Facilitator's to Learner Ratio: 2:25
Time of Instruction: 01 hrs. / 30 min
Media: Power Point, Printed Reference Material
Step 3 Problem Demonstration Exercises
Facilitator’s Note: Instructor will guide students through the problem data to the solution.
Go over the data and identify the task to be accomplished
Classify each listed cost as either fixed or variable. Instructor might ask students if Sebastian’s would incur this same cost whether one ticket was sold or 1000 tickets.
Move to the next slide for continuation of the solution.
An alternative presentation would be to work the solution on the overhead projector or whiteboard. That is likely more engaging for the students. Be sure to cover slides # Contribution Margin and slide #44 Graphic Solution if you choose this alternative. Then skip to slide #46 for analytical questions and slides #48-49 for additional sample problems regarding Target Profit.

19. Solving the Problem (part 1)
Identify the key variables in the equation
What are the fixed costs?
Facilities cost
Staff (actors who double as servers) 1000
Kitchen staff
Stage crew
Total
What are the variable costs?
$10 Food/Ticket * #Tickets
What is the revenue?
$30 Price/Ticket * #Tickets
Identify the key variables in the equation
What are the fixed costs?
Facilities cost
Staff (actors who double as servers) 1000
Kitchen staff
Stage crew
Total
What are the variable costs?
$10 Food/Ticket * #Tickets
What is the revenue?
$30 Price/Ticket * #Tickets
Identify the key variables in the equation
What are the fixed costs?
Facilities cost
Staff (actors who double as servers) 1000
Kitchen staff
Stage crew
Total
What are the variable costs?
$10 Food/Ticket * #Tickets
What is the revenue?
$30 Price/Ticket * #Tickets
Identify the key variables in the equation
What are the fixed costs?
Facilities cost
Staff (actors who double as servers) 1000
Kitchen staff
Stage crew
Total
What are the variable costs?
$10 Food/Ticket * #Tickets
What is the revenue?
$30 Price/Ticket * #Tickets
Show Slide #19: Solving the Problem (part 1)
Facilitator’s Note: Problem Demonstration Exercises
Step 3 Demonstration exercise – Identify Key Variables
They should successfully identify the fixed and variable costs
They should express the FC as a constant.
They should express VC and Revenue on a per-ticket basis and as a total cost (using the unknown variable # tickets)
1st Mouse Click View:
2nd Mouse Click View:
3rd Mouse Click View:

20. Define Contribution Margin
Contribution Margin = Sales – Variable Cost
Unit Contribution Margin Represents the dollar amount that each unit sold Contributes toward profit
Unit Contribution Margin =
Selling Price $/Unit – Variable Cost $/Unit
What is the Unit Contribution Margin for Sebastian’s Dinner Theater?
For every ticket sold, profit increases by:
$30 - $10 = $20
Contribution Margin = Sales – Variable Cost
Unit Contribution Margin Represents the dollar amount that each unit sold Contributes toward profit
Unit Contribution Margin =
Selling Price $/Unit – Variable Cost $/Unit
What is the Unit Contribution Margin for Sebastian’s Dinner Theater?
For every ticket sold, profit increases by:
$30 - $10 = $20
Contribution Margin = Sales – Variable Cost
Unit Contribution Margin Represents the dollar amount that each unit sold Contributes toward profit
Unit Contribution Margin =
Selling Price $/Unit – Variable Cost $/Unit
What is the Unit Contribution Margin for Sebastian’s Dinner Theater?
For every ticket sold, profit increases by:
$30 - $10 = $20
Contribution Margin = Sales – Variable Cost
Unit Contribution Margin Represents the dollar amount that each unit sold Contributes toward profit
Unit Contribution Margin =
Selling Price $/Unit – Variable Cost $/Unit
What is the Unit Contribution Margin for Sebastian’s Dinner Theater?
For every ticket sold, profit increases by:
$30 - $10 = $20
Show Slide #20: Define Contribution Margin
Facilitator’s Note: Problem Demonstration Exercises
Step 4 Demonstration exercise – Define Contribution Margin
Contribution Margin = Sales – Variable Cost
1st Mouse Click View:
Unit Contribution Margin represents the dollar amount that each unit sold Contributes toward profit
That is, profit will increase by that dollar amount for each additional unit sold.
Even in a loss situation, the loss will decrease by that dollar amount for each additional unit sold.
2nd Mouse Click View:
Ask students to calculate the unit contribution margin for the demonstration problem
3rd Mouse Click View:
Unit contribution margin = $30-$10 = $20
That is, profit will increase by $20 for every additional ticket sold.

21. Define Contribution Margin (Cont.)
Contribution Margin may be stated as a Percentage:
Unit Contribution Margin/Unit Selling Price
Sebastian’s Contribution Margin Percentage =
$20/$30 =
$20/$30 = approximately .67 or 67%
For every $1 of sale, profit will increase by approximately $.67
Show Slide #21: Define Contribution Margin (Cont.)
Facilitator’s Note: Problem Demonstration Exercises
Step 4 Demonstration exercise – Define Contribution Margin (cont’d)
Sometimes contribution margin is stated as a percentage of selling price.
The calculation for contribution margin percentage is CM/Sales.
This can be used to determine an average contribution margin when multiple products are used.
Or, if using per unit amounts: Unit CM/Unit Selling price
The interpretation is similar. For ever $1 of sale, profit increases by the CM percentage * $1

22. Solving the Problem (part 2)
Revenue – Variable Cost – Fixed Cost = Profit
Breakeven is the point where Profit = 0
$30(#Tickets) – $10(#Tickets) – $2000 = $0
($30-$10)(#Tickets) – $2000 = $0
$20(#Tickets) – $2000 = $0
$20(#Tickets) = $2000
#Tickets = 2000/20
#Tickets = 100
Revenue – Variable Cost – Fixed Cost = Profit
Breakeven is the point where Profit = 0
$30(#Tickets) – $10(#Tickets) – $2000 = $0
($30-$10)(#Tickets) – $2000 = $0
$20(#Tickets) – $2000 = $0
$20(#Tickets) = $2000
#Tickets = $2000/$20
#Tickets = 100
Revenue – Variable Cost – Fixed Cost = Profit
Breakeven is the point where Profit = 0
$30(#Tickets) – $10(#Tickets) – $2000 = $0
($30-$10)(#Tickets) – $2000 = $0
$20(#Tickets) – $2000 = $0
$20(#Tickets) = $2000
#Tickets = $2000/$20
#Tickets = 100
Revenue – Variable Cost – Fixed Cost = Profit
Breakeven is the point where Profit = 0
$30(#Tickets) – $10(#Tickets) – $2000 = $0
($30-$10)(#Tickets) – $2000 = $0
$20(#Tickets) – $2000 = $0
$20(#Tickets) = $2000
#Tickets = $2000/$20
#Tickets = 100
Revenue – Variable Cost – Fixed Cost = Profit
Breakeven is the point where Profit = 0
$30(#Tickets) – $10(#Tickets) – $2000 = $0
($30-$10)(#Tickets) – $2000 = $0
$20(#Tickets) – $2000 = $0
20(#Tickets) = 2000
#Tickets = 2000/20
#Tickets = 100
Revenue – Variable Cost – Fixed Cost = Profit Breakeven is the point where Profit = 0 $30(#Tickets) – $10(#Tickets) – $2000 = $0 (30-10)(#Tickets) – 2000 = 0 20(#Tickets) – 2000 = 0 20(#Tickets) = 2000 #Tickets = 2000/20 #Tickets = 100
Revenue – Variable Cost – Fixed Cost = Profit
Breakeven is the point where Profit = 0
$30(#Tickets) – $10(#Tickets) – $2000 = $0
($30-$10)(#Tickets) – $2000 = $0
$20(#Tickets) – $2000 = $0
20(#Tickets) = 2000
#Tickets = 2000/20
#Tickets = 100
Revenue – Variable Cost – Fixed Cost = Profit
Breakeven is the point where Profit = 0
$30(#Tickets) – $10(#Tickets) – $2000 = $0
($30-$10)(#Tickets) – $2000 = $0
20(#Tickets) – 2000 = 0
20(#Tickets) = 2000
#Tickets = 2000/20
#Tickets = 100
Revenue – Variable Cost – Fixed Cost = Profit
Breakeven is the point where Profit = 0
$30(#Tickets) – $10(#Tickets) – $2000 = $0
($30-$10)(#Tickets) – $2000 = $0
$20(#Tickets) – $2000 = $0
20(#Tickets) = 2000
#Tickets = 2000/20
#Tickets = 100
Show Slide #22: Solving the Problem (part 2)
Facilitator’s Note: Problem Demonstration Exercises
Step 5 Demonstration Exercise – Calculate Breakeven point in units using the equation
Setting up the equation is key to success in solving for breakeven units.
Facilitator’s Note: Point out that:
Revenue = Price per unit * Number of units
Variable Cost = VC per unit * number of units
1st Mouse Click View:
Combine items that use the same variable.
2nd Mouse Click View:
Perform operation in parentheses
3rd Mouse Click View:
Note that $20 is the unit contribution margin. For every ticket sold, 20 is contributed toward covering fixed costs and increasing profits.
4th Mouse Click View:
Unit Contribution Margin of $20 is the result of subtracting Variable Cost of $10 per unit from Selling Price of $30 per unit.
5th Mouse Click View:
Add $2000 to both sides of the equation.
6th Mouse Click View:
Divide by the coefficient of the unknown variable “#Tickets”.
Or, divide both sides of the equation by $20.
Note that $20 is the contribution margin. The common shortcut of Breakeven Units = FC/Unit CM is derived from this step in the equation. (We still recommend only memorizing the original equation.)
7th Mouse Click View:
Note that the dollar signs would cancel at this point. Dividing dollars by dollars yields a non-dollar denominated value.
8th Mouse Click View:
Solution: 100 tickets will yield a profit of zero.

23. Graphic Solution $ Units Sold Show Slide #23: Graphic Solution
Facilitator’s Note: Problem Demonstration Exercises
Step 5 Demonstration Exercise – Calculate Breakeven point in units (cont’d)
Facilitator’s Note: Use the graph to prove the solution
At 100 units, Revenue is 30*100 or $3000 and total cost is (10*100) or $3000
Any quantity less than 100 units will result in a loss, any quantity greater than 100 units will result in profit.
Units Sold

24. $30(#Tickets) – $10(#Tickets) – $2000 = $0
Proving the Solution
Plug solution into the original equation:
$30(#Tickets) – $10(#Tickets) – $2000 = $0
$30(100) – $10(100) – $2000 = $0
$3000 – $1000 – $2000 = $0
Show Slide #24: Proving the Solution
Facilitator’s Note: Problem Demonstration Exercises
Step 5 Demonstration Exercise – Calculate Breakeven point in units (cont’d)
The Equation proves the calculation is correct.
Plug solution into the original equation:
$30(#Tickets) – $10(#Tickets) – $2000 = $0
$30(100) – $10(100) – $2000 = $0
$3000 – $1000 – $2000 = $0

25. LSA #3 Check on Learning Q1. Is this quantity reasonable?
A1. Can we reasonably expect to sell this number of tickets?
Q2. If not, why not?
A2. The most critical reason “why not” is capacity.
Does the facility even hold 100 attendees?
Can we cook and serve food for 100 attendees?
Another reason to consider is demand. If there is not sufficient demand, is there anything we can do, such as advertising, to increase demand.
Show Slide #25: LSA #3 Check on Learning
Facilitator’s Note: Ask check on learning question, facilitate discussion on answers given by 1st reading to them the following;
Read: Since the purpose of breakeven analysis is feasibility, now that the breakeven number of tickets is known, we should ask ourselves questions about feasibility.
Q1. Is this quantity reasonable?
A1. Can we reasonably expect to sell this number of tickets?
Q2. If not, why not?
A2. The most critical reason “why not” is capacity.
Does the facility even hold 100 attendees?
Can we cook and serve food for 100 attendees?
Another reason to consider is demand. If there is not sufficient demand, is there anything we can do, such as advertising, to increase demand.

26. LSA #3 Check on Learning (Cont.)
Q3. Does the Unit Contribution Margin appear in the Breakeven Equation? A3. Yes Q4. Using Sebastian’s Dinner theatre data how many tickets must be sold to yield a profit of $500 per show? A4. 30(#Tickets) - 10(#Tickets) – 2000 = 500 * Used the Breakeven equation, replaced “0” with the target profit number Q5. $1000 per show? A5. Sale Price = $30 / ticket Fixed Cost = $2,000 Variable Cost = $ 10 / ticket
Show Slide #26: LSA #3 Check on Learning
Facilitator’s Note: Check on Learning (Cont.)
Q3. Does the Unit Contribution Margin appear in the Breakeven Equation?
A3. Yes.
Contribution margin = Revenue – Variable Cost.
Breakeven Equation = Revenue – Variable Cost – Fixed Cost
Q4. How many tickets must be sold to yield a profit of $500 per show?
A4. Equation set up: Use the Breakeven equation, replacing “0” with the target profit number.
30(#Tickets) - 10(#Tickets) – 2000 = 500
Note: The solution to the equation follows.
(30-10)(#Tickets) – 2000 = 500
20(#Tickets) – 2000 = 500
20(#Tickets) = 2500
#Tickets = 2500/20
#Tickets = 125
Not surprisingly the additional number of tickets required above breakeven (100) is 25. Since the desired profit is 500 and the contribution margin is 20, profit will increase by 20 per ticket sold.
Q5. $1000 per show?
A5. 30(#Tickets) - 10(#Tickets) – 2000 = 1000
(30-10)(#Tickets) – 2000 = 1000
20(#Tickets) – 2000 = 1000
20(#Tickets) = 3000
#Tickets = 3000/20
#Tickets = 150

27. LSA #3 Summary
During this lesson, we studied and talked about; LSA #1 Identify Assumptions Underlying Break Even Analysis •We What is Break Even •Revenues / Cost •Fixed Rates / Variable Cost / Mixed Cost / Semi-variable Cost •Why we need Assumptions LSA #2 Identify Key Variables in Break Even Equation from Scenario •Scenarios utilizing Break Even equation LSA #3 Conduct Problem Demonstration Exercises for Key Variable, Contribution Margin and Break Even Points. •Conducted several sample exercises dealing with Contribution Margin and Break Even Points.
Show Slide #27: LSA #3 Summary
Facilitator's Note: During this lesson, we studied and talked about;
LSA #1 Identify Assumptions Underlying Break Even Analysis
•We What is Break Even
•Revenues / Cost
•Fixed Rates / Variable Cost / Mixed Cost / Semi-variable Cost
•Why we need Assumptions
LSA #2 Identify Key Variables in Break Even Equation from Scenario
•Scenarios utilizing Break Even equation
LSA #3 Conduct Problem Demonstration Exercises for Key Variable, Contribution Margin and Break Even Points.
•Conducted several sample exercises dealing with Contribution Margin and Break Even Points.

28. Using the Breakeven Worksheet
Enter Data from
Practical Exercises
in Spaces Provided
Show Slide #28: Using the Breakeven Worksheet
Facilitator’s Note: Before the commencement of the PE, go over with learners the area’s certain key points displayed on the screen. Ask if there are any questions pertaining the worksheet and its purpose. Answer or clear up any uncertainties' the learners may have.
Enter Data from Practical Exercises in Spaces Provided
Use Tabs to Navigate
Use Tabs to Navigate

29. Using the Breakeven Worksheet (Cont.)
Show Slide #29: Using the Breakeven Worksheet (Cont.)
Facilitator’s Note: Instruct Learner’s to go to the Breakeven Point tab
“Breakeven Point” Tab shows Graphic Solution and Proof Calculation
“Breakeven Point” Tab shows Graphic Solution and Proof Calculation

30. Using the Breakeven Worksheet (Cont.)
Blue Area indicates
Contribution Margin at
Various Quantities
Show Slide #30: Using the Breakeven Worksheet (Cont.)
Facilitator’s Note: Instruct Learner’s to go to the Revenue tab
Blue Area indicates Contribution Margin at Various Quantities

31. Using the Breakeven Worksheet (Cont.)
Show Slide #31: Using the Breakeven Worksheet
Facilitator’s Note: Instruct Learner’s to go to the Revenue tab
“Cost” Tab Details Fixed Cost, Variable Cost, and Total Cost
“Cost” Tab Details Fixed Cost, Variable Cost, and Total Cost

32. Practical Exercise / Review
Show Slide #32: Practical Exercise / Review
Practical Exercise / Review: 9.1 Practical Exercise Calculate Break Even Point
Method of Instruction: Practical Exercise
Facilitator's to Learner Ratio: 2:25
Time of Instruction: 00 hrs. / 30 min.
Media: Handouts
Facilitator’s Note: This is a run self-study exercise. You will use the handouts to complete your practical exercises in this segment. You will enter data to complete PE Calculate Breakeven Point.
Special Instructions: Ensure Learners have access to PE Calculate Breakeven Point and all related material to complete the self-study practical exercise.
Objectives: With at least 80% accuracy (70% for international Learners): Learners as individuals will answer the questions in the PE Calculate Breakeven Point, using the Excel 9.1 Breakeven Analysis worksheet for discussion and its answers.
Facilitator’s Material: Each primary Facilitator's should possess a lesson plan, slide deck, course handouts, practical exercise with answer key, summary worksheet containing FM 1-06 (Financial Management Operations), excel template and lesson created notes.
Learner’s Material: Learners should possess course handouts, self-study practical exercise titled PE Calculate Breakeven Point, summary worksheet containing FM 1-06 (Financial Management Operations), Excel 9.1 Breakeven Analysis Final with access to Bb, and standard classroom supplies. 
Materials Needed:
9.1 Breakeven Analysis Excel worksheet
Practical Exercise titled: PE Calculate Breakeven Point
*Pen Or Pencil
*Blank Paper
Note: (* Learner responsibility)
Procedures/Instructions:
All situations have one correct answer.
You will complete this PE immediately following the class on Calculate Break Even Point.
You will have 15 minutes for completion of this practical exercise, and 15 minutes for a review.
Be prepared to go over the entries and individual solutions for each question.
General Information: Learners will first attempt practical exercises using pencil and paper. Then, the instructor will go over the solution with the students. After that, the instructor will introduce the Excel Breakeven spreadsheet (screenshots follow) and students will do another practical exercise using the spreadsheet. Encourage the learners to do this as individuals, and that they will have time to complete this practical exercise, followed by a review at the completion.
Instructional Lead-in: Given the different situations and scenarios within the PE, you will need to calculate and get answers to each question given.
PE answer to how many units must be sold to achieve this income level.
PE 100.2, answer to how many lines of transcription must Corvell produce to make a profit of $50,000.
PE 100.3, answer to what dollar level of sales must Grandma achieve to break even? (Round to the next dollar)
PE 100.4, and finally answer to If the contribution margin on Irving’s merchandise is 60%, what is the monthly break even sales volume in dollars.
Feedback: AAR will be conducted after the PE, along with a Learner end of course critique will be conducted at the end of the course.
Facilitator’s Note: If you experience difficulties, ask the Facilitator‘s or assistant Facilitator's for immediate assistance or help.
Requirements:
Learners conduct their own work.
Enter relevant report data to answer questions in the PE by utilizing the excel worksheet.
Practical Exercise Calculate Breakeven Point
9.1 Breakeven Analysis worksheet
HO Calculate Breakeven Point
Practical Exercise AJGPC100.1
Practical Exercise AJGPC100.2
Practical Exercise AJGPC100.3
Practical Exercise AJGPC100.4
Evaluation: To obtain a "Go" in this PE, you must:
1. Correctly as a individual answer and fill out the answers in the PE utilizing the excel worksheet.
2. Calculate and compute the answers to the situation. 3. Be prepare to present the your answers during the review
Facilitator’s Note: This begins the self-study practical exercise. Learners are on their own at this point.
Commence Practical Exercise:
Practical Exercise Solution/Answer Key: 9.1 Calculate Break Even Point
Solution AJGPC100.1
How many units must be sold to achieve this income level?
*Revenue – (Variable Cost - Fixed Cost) = Profit
Identify the key variables.
(#Units * 25)- [(#Units*15) – ($140,000) = .1 ($140,000)]
($25-$15) * #Units Sold – $140,000 = $14,000
$10 * #Units Sold = $154,000
#Units Sold = $154,000/$10
# = 15,400
Solution AJGPC100.2
How many lines of transcription must Corvell produce to make a profit of $50,000?
*Solve – Breakeven Units –
Solution AJGPC100.3
What dollar level of sales must Grandma achieve to break even? (round to the next dollar)
*Solve – Breakeven Units – 8572
Solution AJGPC100.4
If the contribution margin on Irving’s merchandise is 60%, what is the monthly break even sales volume in dollars?
*Solve – Breakeven Units – 12500

33. TLO Summary Action: Calculate Break Even Point
Condition: FM Leaders in a classroom environment working individually and as a member of a small group, using doctrinal and administrative publications, self-study exercises, personal experiences, practical exercises, handouts, and discussion.
Standard: With at least 80% accuracy (70% for international Learners):
Identify Assumptions Underlying Break Even Analysis
Identify Key Variables in Break Even Equation from Scenario
Conduct Problem Demonstration Exercises for Key Variable, Contribution Margin and Break Even Points.
Show Slide #33: TLO Summary
Facilitator’s Note: Restate the TLO
Action: Calculate Break Even Point
Condition: FM Leaders in a classroom environment working individually and as a member of a small group, using doctrinal and administrative publications, self-study exercises, personal experiences, practical exercises, handouts, and discussion.
Standard: With at least 80% accuracy (70% for international Learners):
Identify Assumptions Underlying Break Even Analysis
Identify Key Variables in Break Even Equation from Scenario
Conduct Problem Demonstration Exercises for Key Variable, Contribution Margin and Break Even Points.
“Or”
Facilitator's at this time, have one learner from each group to explain the most important take away to them from this lesson. Facilitate a discussion on each answer.