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Break-Even Chart

Break-Even Chart. A Business supplies the following figures about its activities: Fixed Costs: = €300,000 Variable Cost: = €20 per unit Forecast output (Sales): = €20,000 units Selling Price: = €50 per unit Illustrate by means of a break-even chart: The break-even point

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Break-Even Chart

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  1. Break-Even Chart A Business supplies the following figures about its activities: Fixed Costs: = €300,000 Variable Cost: = €20 per unit Forecast output (Sales): = €20,000 units Selling Price: = €50 per unit Illustrate by means of a break-even chart: • The break-even point • The profit at full capacity • The margin of safety (40 marks)

  2. Answer Units 20,000 Fixed Costs: €300,000 Variable Costs (20,000 x €20) = €400,000 Total Costs: €300,000 + €400,000 = €700,000 Total Revenue: (20,000 x €50) = €1,000,000 Profit = €1,000,000 - €700,000 = €300,000

  3. Answer  Break-even formula: Fixed Costs Selling Price(SP) per unit – Variable Cost(VC) per unit = 300,000 50 – 20 = 10,000 units

  4. Answer Drawing the Break-Even Chart To plot break-even point on chart • From X axis 10,000 • From Y axis €500,000 (10,000 x €50)

  5. BREAKEVEN CHART € 000 Total Revenue 1000 Profit at full Capacity 900 PROFIT 800 Total Cost 700 600 Break-evenpoint 500 400 300 F.C. Loss 200 Margin of Safety 100 0 5,000 10,000 15,000 20,000 Units

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