Break even

Break even

1. fixed costs

   • This doesn't change with output
     • examples - rent
       • Salary

2. Variable costs

   • example - wages
     • this does change with output
       • advantages and disadvantages
         • sales needed to break even
           • advantages
             • shows changes of output
           • disadvantages
             • it assumes all output
               • the plotting of the points have to be accurate
     • raw materials

3. break even analysis

   • it shows the point at which the business to start making profit
   • it can be used to calculate the sales needed to make a profit at any given price
   • a business finds the break even point when they want to make changes in price
   • also given to work out profit

4. table and chart

   • step 1 - complete the table
     • step 2 - plot fixed costs
       • step 3 - plot variable costs
         • step 4 - plot total costs
           • step 5 - plot sales
             • step 6 - when the lines (sales&total) cross this is the break even
               • circle it and draw a line down to the number that it goes to

5. revenue

   • this is how much the business makes
   • total revenue
     • formulas
       • number of sales x selling price
       • total cost
         • fixed cost + variable costs
           • how ICT spreadsheet help us with break even analysis
             • if you need to add something the computar will change and do it for you
               • a lot more accurate
                 • also is quicker as it will only take a few seconds
       • profit
         • total revenue - total costs