What Is A Break Even Graph?

A Break Even Graph is a graph which shows total costs and total revenue and the break even point where total costs equal total revenue

What Is A Budget?
To produce a break even graph the
business needs to prepare a budget A budget is a forecast of income and expenditure over a period of time As the budget is only a forecast in reality things could be very different for example interest rates may change making borrowing more expensive

The Break Even Graph

A business needs to know
Revenue/Costs

Break Even Chart

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at what point it will start making a profit The break even point is the point where the business makes neither a profit or a loss, that is where the total cost line crosses the total revenue line Total Revenue= Total Costs

Sales Total Revenue Total Fixed Costs Total Costs

How Do You Use A Break Even Graph?

Break Even Chart

If sales exceed the break

even point the amount it does so is called the margin of safety The business will use the break even graph to check on sales. If they sell less than the break even point then they will know they are making a loss
Revenue/Costs

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Sales Total Revenue Total Fixed Costs Total Costs