STARTER: Carly wants to set up a Business making Apple Pies. What are her Fixed and Variable Costs?

Break even
Lesson Outcomes:
To understand how to work out the break-even point mathematically To understand how to construct a break even chart

Recap
Sales Revenue Fixed cost Variable cost Total cost Average cost Whats another name for sales revenue?

Work out the costs and the sales revenue

0 units Fixed costs 100 units 200 units 300 units

Total variable costs

Total costs Sales revenue

Fixed costs = 2,000 Variable costs = 10 per unit Selling price = 20 per unit

Work out the costs and the sales revenue

0 units Fixed costs 2,000 100 units 2,000 200 units 2,000 300 units 2,000

Total variable costs

Total costs Sales revenue

Fixed costs = 2,000 Variable costs = 10 per unit Selling price = 20 per unit

Using a grid to help you

0 Fixed costs 2,000 0 100 2,000 200 2,000 300 2,000

Total variable costs

Total costs Sales revenue

1,000

2,000

3,000

Fixed costs = 2,000 Variable costs = 10 per unit Selling price = 20 per unit

Using a grid to help you

0 Fixed costs 2,000 0 100 2,000 200 2,000 300 2,000

Total variable costs

Total costs Sales revenue

1,000
3,000

2,000
4,000

3,000
5,000

2,000

Fixed costs = 2,000 Variable costs = 10 per unit Selling price = 20 per unit

Using a grid to help you

0 Fixed costs 2,000 0 100 2,000 200 2,000 300 2,000

Total variable costs

Total costs Sales revenue

1,000
3,000 2,000

2,000
4,000 4,000

3,000
5,000 6,000

2,000
0

Fixed costs = 2,000 Variable costs = 10 per unit Selling price = 20 per unit

Fixed costs

Costs and sales Revenue 2,000

Fixed costs

Number of units

Variable costs

Costs and sales Revenue 2,000 1,000

Fixed costs

Variable costs

100

Number of units

Costs and sales Revenue

Total costs

Total costs 3,000 2,000 1,000 Fixed costs

Variable costs

100

Number of units

Costs and sales Revenue 4,000 3,000 2,000 1,000

Sales revenue
Sales revenue

Total costs

Fixed costs

Variable costs

0 200

100

Number of units

Costs and sales Revenue 4,000 3,000 2,000 1,000

Break-even point
Sales revenue Break-even Point Total costs

Fixed costs

Variable costs

100

200

Number of units

Question 1
Fixed costs = 10,000 Variable costs = 10 per unit Selling price = 50 per unit Work out the break even point Plot a break-even graph
Maximum y value is 15,000 Maximum x value is 300

Using a grid to help you - 1

0 Fixed costs Total variable costs Total costs Sales revenue Fixed costs = 10,000 Variable costs = 10 per unit Selling price = 50 per unit Formulas Fixed costs stay the same Total variable costs = variable costs x number of units Total Costs = fixed costs + total variable costs Sales revenue = selling price x number of units 100 200 300

Question 2
Fixed costs = 5,000 Variable costs = 10 per unit Selling price = 20 per unit Work out the break even point Plot a break-even graph
Maximum y value is 12,000 Maximum x value is 600

Using a grid to help you - 2

0 Fixed costs Total variable costs Total costs Sales revenue Fixed costs = 5,000 Variable costs = 10 per unit Selling price = 20 per unit Formulas Fixed costs stay the same Total variable costs = variable costs x number of units Total Costs = fixed costs + total variable costs Sales revenue = selling price x number of units 200 400 600

Question 3
Fixed costs = 7,000 Variable costs = 7.50 per unit Selling price = 21.50 per unit Work out the break even point Plot a break-even graph
Maximum y value is 13,000 Maximum x value is 600

Using a grid to help you - 3

0 Fixed costs Total variable costs Total costs

200

400

600

Sales revenue
Fixed costs = 7,000 Variable costs = 7.50 per unit Selling price = 21.50 per unit Formulas Fixed costs stay the same Total variable costs = variable costs x number of units Total Costs = fixed costs + total variable costs Sales revenue = selling price x number of units

Question 4
Fixed costs = 2,000 Variable costs = 2 per unit Selling price = 7.40 per unit Work out the break even point Plot a break-even graph Units sold 400

Using a grid to help you - 4

0 Fixed costs Total variable costs Total costs Sales revenue Fixed costs = 2,000 Variable costs = 2 per unit Selling price = 7.40 per unit Formulas Fixed costs stay the same Total variable costs = variable costs x number of units Total Costs = fixed costs + total variable costs Sales revenue = selling price x number of units 200 400 600

Question 5
Fixed costs = 23,000 Variable costs = 250 per unit Selling price = 500 per unit Work out the break even point Plot a break-even graph Units sold 150

Using a grid to help you - 5

0 Fixed costs Total variable costs Total costs Sales revenue Fixed costs = 23,000 Variable costs = 250 per unit Selling price = 500 per unit Formulas Fixed costs stay the same Total variable costs = variable costs x number of units Total Costs = fixed costs + total variable costs Sales revenue = selling price x number of units 50 100 150

Extension task mathematically work out the break-even point for all the grids using the formula on the next slide

How to calculate break-even point without drawing a graph

Break-even point = Fixed costs Contribution

Contribution = selling price variable cost