1. BREAK-EVEN The break-even point of a new product is the level of production and sales at which costs and revenues are exactly equal. It is the point at which revenue exactly covers costs and there is not a profit or loss.

2. COSTS VARIABLE COSTS FIXED COSTS Raw materials Components Direct labour Overheads, i.e. premises costs wages admin costs

3. Break-even formula Break-even point = Fixed costs Selling price (per unit) – variable cost (per unit) Example : £166,000 £50 - £19.50 = 5,443 units

4. Break-even Chart 050100150200 Fixed costs12000 Variable costs01000200030004000 Total Costs1200013000140001500016000 Sales05000100001500020000

5. Break-even Graph Break-even point