Student or Team Name:

Break-Even Analysis

Break-even analysis attempts to determine the volume of sales necessary for a business to
cover costs, or to make revenue equal costs. It is helpful in setting prices, estimating profit or
loss potentials, and planning for the coming period. There are a couple of formulas that will be
helpful for this assignment:

1. An important distinction is made in the calculation between fixed and variable costs.
Fixed costs do not change with the units sold (at least in the short term). Variable
costs depend on the units sold in the period. Identify each of the following as a fixed
(F) or variable (V) cost in the context of BizCafe.
Item Cost Type Item Cost Type
Advertising Equipment

Coffee Payroll

Cups Rent

2. Calculate the break-even units if fixed costs are $12,000 and you are selling coffee for
$3.60 at a cost of $0.40 per cup.

3. Using the same fixed and variable costs as in question 2, what is the new break-even
point if the price is lowered to $2.90?

4. Using the fixed and variable costs from question 2, what is the break-even price if you
project that you will sell 3,000 cups of coffee?

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Student or Team Name:

5. How can knowing the break-even units help you with other decisions?