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Break Even

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4 views22 pages

Break Even

Uploaded by

Daniel Latiban Gador
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Break-Even Point

LOSS PROFIT

TOTAL
TOTAL COST
REVENUE

Presented by: GIFT ANNE G. CLARION


AT THE END OF THE
LESSON, YOU SHOULD
BE ABLE TO:

Lesson 1
Define Break-even

Objective
Illustrate how to
2 determine break-
even point and
sales
BREAK-EVEN
POINT
It is the point at which
neither profit nor loss is
made. The profit at the
break-even is zero.

R(x) = C(x)
It is also an indicator to
figure out if a certain
business is viable or not.
BREAK-EVEN
POINT
It also determines the
needed volume of products
that must be sold to attain a
balance between cost and
revenue.
But, when we talk about
break-even point, we are not
only talking about QUANTITY
but also the REVENUE.
BREAK-EVEN
SALES
This refers to the amount of
product that must be
reached to attain a balance
between cost and revenue

FORMULA:
Break-even Sales = Selling Price x Break-even
Point
COST
It is the expenses incurred that is directly attributable
to for the production of the product.

Types of Cost:
Variable Cost – expenses of producing one unit of
product.
Fixed Cost – expenses that remain the same no
matter how much product is manufactured or sold
(e.g. Rent, Wages of employees, Utilities)
FORMULA:
Total Cost = Variable Cost + Fixed
Cost
C(x) = V(x) + F

Take note:
Where x = no. of units manufactured or
sold
REVENUE
Is the money received for the sale of goods or
payments for the services rendered.

FORMULA:
Revenue = price per unit x No. of
Units
R(x) = p(x)
PROFIT
It is the money earned after paying the costs of
producing and selling products or services

FORMULA:
Profit = Revenue - Cost

P(x) = R(x) – C(x)


PROBLEM
The Chuchu Sofa Company
produces sofa chairs. The fixed
monthly cost of production is
₱470,000 and the variable cost per
sofa is ₱6,200. The sofa sells for
₱10,500 per piece. For a monthly
volume of 140 sofa chairs,
determine the total cost, total
revenue and total profit.
GIVEN:
Fixed Cost = 140 sofa produced
₱470,000
Selling Price = every month
₱10,500
Variable Cost = ₱6,200 per
sofa
Determine the following:
1.Total Cost of Product
2.Total Revenue of Product
3.Profit of the Product
4.Break-even Point
5.Break-even Sales
TOTAL COST
C(x) = V(x) + F
C(x) = V(x) + F
C(x) = ₱6,200x + ₱470,000 Cost Function
C(140) = ₱6,200(140) + ₱470,000
C(140) = ₱868,000 + ₱470,000
C(140) =
₱1,338,000
TOTAL REVENUE
R(x) = p(x)
R(x) = p(x)
R(x) = ₱10,500x Revenue
R(140) = ₱10,500(140)
Function
R(140) =
₱1,470,000
PROFIT
P(x) = R(x) – C(x)
P(x) = R(x) – C(x)
P(x) = ₱10,500x – (₱6,200x +
₱470,000)
P(x) = ₱10,500x – ₱6,200x -
₱470,000
P(x) = ₱4,300x - ₱470,000 Profit Function
P(140) = ₱4,300(140) - ₱470,000)
P(140) = ₱602,000 - ₱470,000
P(140) =
₱132,000
PROFIT
P(x) = R(x) – C(x)
P(x) = R(x) – C(x)
P(x) = ₱1,470,000 - ₱1,338,000
P(x) =
₱132,000
BREAK-EVEN POINT
R(x) = C(x)
p(x) = V(x) + F
₱10,500x = ₱6,200x +
₱10,500x - ₱470,000
₱6,200x = ₱470,000
₱4,300x = ₱470,000
₱4,300 ₱4,300
x=
x ≈ 110 sofa
109.30
BREAK-EVEN POINT
P(x) = 0
₱4,300x - ₱470,000 = 0
₱4,300x = ₱470,000
₱4,300x = ₱470,000
₱4,300 ₱4,300
x=
x ≈ 110 sofa
109.30
chairs
BREAK-EVEN SALES
Break-even Sales = Selling Price x Break-even
Point
Break-even Sales = Selling Price x Break-even
Point
Break-even Sales = ₱10,500 x 110
Break-even Sales =
₱1,155,000
Therefore, the break-even point is at x = 110 sofa
chairs and break-even sales is amounting to
₱1,155,000.
Questions?

Your
questions
matter.

Ask now!
Assignment
Suppose a firm manufactures hand
towels and sells them for ₱75 each. If
the costs incurred in the production
and sale of the hand towels are
₱200,000 plus ₱25 for each hand
towel produced and sold.
Answer the following:
a. Determine the total cost, revenue and
profit.
b. Determine the Cost function, Revenue
Function and Profit Function
c. Find the break-even point and sales

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