Break Even Analysis

Costs
1. Fixed
  1. Costs that don't change depending on output e.g. rent, bills
2. Variable
  1. Costs that do change depending on output e.g. petrol, raw materials
    1. Variable costs x output
Break Even Formula
1. Fixed Cost divided by Contribution
  1. Contribution = Selling price - Variable cost
Graphs
1. Profit is anything above the point where the total socts crosses the revenue
Profits, Cost and Revenue
1. Profit
  1. Revenue - Total Costs
2. Costs
  1. The expenses the business has to pay
3. Revenue
  1. The total amount of money made from sales
  2. Output x Selling Price
Break even analysis is calculating the break even point, using fixed costs, variable costs and revenue
1. Uses
  1. Can see how much stock needs to be sold before hand
  2. Helps companies set targets
2. Limitations
  1. It assumes everything gets sold and nothing is kept for stock
  2. Hard to do for multiple products as it would be a tedious process

Resource summary

	Created by webbr about 11 years ago