Break even calcs

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Break even calcs
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Break even analysis- Income equation

• Total revenue (price)(units sold)
• In form
• Y MX C where c0
• Units vary price doesnt

3
Break even analysis- Cost equation

• Total cost (variable cost)(units) Fixed cost
• Y MX C
• Units vary
• variable cost per unit and fixed costs dont

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Break even analysis bringing together total
revenue and total cost
Total revenue

PROFIT
Total cost
BREAK EVEN POINT
LOSS
Fixed cost
No of units
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Johns Sunglass Hut

• John sells sunglasses from his internet web page
  for 24 each. Each pair of sunglasses costs John
  18.50 and he pays 50 per month for his internet
  store. How many pairs of sunglasses must John
  sell each month to break even?

Step 1 The Total revenue equation Y 24 X
where Y is and X is number of units
Step 2 Graph the Total revenue equation. What
value will y have at various values of X?
Step 3 The total cost equation. y 18.5 X 50
where Y is and X is number of units
Step 4 Graph the Total cost equation. What
value will Y have at various values of X
Step 5 Break even is where lines cross BOTH
EQUATIONS WORK AT THIS POINT
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Graph the Total revenue equation. What value will
y have at various values of X? Graph the Total
cost equation. What value will Y have at various
values of X?

• Where do the lines cross on your graph paper? DO
  BOTH EQUATIONS BALANCE AT THESE COORDINATES?