Department of Education

Region III
DIVISION OF MABALACAT CITY

Name: __________________________________ Grade & Strand: ________________

School: ____________________________________________ Date: ________________

LEARNING ACTIVITY SHEET

ABM 11 BUSINESS MATHEMATICS (Q1-WK7)
Break-even Analysis

I. Introduction
The main reason in putting up a business is to make a profit. Maybe you
have the desire to have your own company despite of the risk that it takes.
The question is how would you know that your company is making a profit
and not loss? How many products you need to sell to at least cover your
costs? The effective way in lowering the risk is to do a break-even analysis.

In this activity sheet, you will learn to do a break-even analysis that will help
you to answer those questions and learn how profit change as sales increase
or decrease.

II. Learning Competency

1. Determine the break-even point.

2. Solve problems involving buying and selling products. ABM_BM11BS-Ij-9

III. Objectives

At the end of this learning activity sheet, you are expected to:
1. define break-even point ;
2. illustrate how to determine break-even point; and
3. determine the break-even point in a given situation.

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IV. Discussion

To understand the break-even analysis, there are few definitions that you
need to know.

1. Fixed cost (FC)- refers to the expenses that does not change regardless of
the amount of goods or services produced or sold. Examples are rent,
salaries of the employees, utilities, and other expenses.

2. Variable cost (VC) – the cost of producing products that vary directly with
the level of output. It increases or decreases depending on the volume of the
products produced.
VC= VC per unit ● number of units

3. Total Cost (TC) = sum of all fixed cost and variable cost. It is given by
TC = FC + VC

4. Revenue (R) – it is the generated total sales of good s or services. It is the

price of the product of the price of the product and the quantity sold. It is
given by
R=p x where p is the price and x is the number of the
units.

At break-even, total cost TC is equal to revenue R (TC=R).

Break-even analysis is very important in profit and loss. It will help you to
determine when your company, or a product or services will be profitable.
For example, how many tubs of maja blanca that you need to sell to cover
your total expenses? Recall that Profit = Revenue - Cost. In this lesson, we
want to determine the level of production at which the profit will be equal to
zero.

The point at which the business will neither earn a profit nor experience loss
is known as the break-even point (BEP). Anything you sell beyond your
break-even point will add a profit.

Break-even Point (BEP) Formula =

The Break-even Chart

The diagram, the X axis is the level of production(output) and the Y-axis is

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the income. Income varies on the level of production (output) of the product.
The blue line represents the total costs (VC + FC). At the start, costs are
greater than income until it reaches the point of intersection A. It means
that the costs are exactly equal to the income, thus there is no profit or loss
made.

Example 1: Rona is planning to run a milk tea shop where she plans to sell
each bottle at ₱90. She assumes her expenses in rent, salary, electricity bill,
water bill and phone bill will be ₱45,000. If the variable cost VC for a bottle
of milk tea is ₱40,
a. What is the break-even quantity?
b. How much profit will he earn if she sells 300 bottles? 1,500 bottles?
c. How many bottles must be sold to earn a profit of ₱50,000?
d. Draw the break-even chart.

Solution:
Given: Price (p) = ₱90
FC = ₱45,000
VC = VC per unit ● number of units
= ₱40x where x is the number of bottles of milk tea
TC = FC+VC = ₱45,000+ ₱40x
R = p●x = ₱90●x = ₱90x

a. At break-even, TC=R, so
Step 1: Write the equation ₱45,000+ ₱40x = ₱90x
Step 2: Combine like terms ₱45,000 = ₱90x - ₱40x
Step 3: Simplify ₱45,000 = ₱50x
Step 4: Solve for x 900 = x

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Other solution using BEP formula =

= = = 900

This implies that 900 bottles of milk tea must be sold monthly so that Rona
will not gain any profit or loss.

b. Profit = Revenue – Cost or P = R - TC

b.1. The value of x = 300 and you want to know the profit.
Solution: P = R - TC
Step 1: Substitute the values P = ₱90x – (₱45,000+ ₱40x)
Step 2: Simplify P = ₱90x – ₱45,000- ₱40x
P = ₱50x – ₱45,000 is the profit function
Step 3: Substitute the value of x then simplify
P = ₱50(300) – ₱45,000 P = ₱15,000 – ₱45,000
P = -₱30,000
 Observe that P<0 when x = 300, it means that the business will
incur loss of ₱30,000.
b.2. You are going to solve for the profit when x = 1,500.
Solution: P = R - TC
Step 1: Substitute the value of x in the profit function from Step 2:b.1.
P = ₱50x – ₱45,000
P = ₱50(1,500) – ₱45,000
Step 2: Simplify P = ₱75,000 – ₱45,000 = ₱30,000
 In this solution, P>0 when x = 1,500, it means that the business
will have a profit of ₱30,000.

c. In this problem, you are asked to find the value of x to earn a profit of
₱50,000 in a month.
Solution: P = R – TC, where P = ₱50,000.
Use the function derived from Step 2 in b.1. P = ₱50x – ₱45,000
Step 1: Substitute the value of P ₱50,000= ₱50x – ₱45,000
Step 2: Simplify ₱50,000+₱45,000 = ₱50x
₱95,000 = ₱50x
1,900 = x
 To earn a profit of ₱50,000, Rona must sell 1,900 bottles of milk
tea in a month

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d. Recall that at break-even, TC =R. Since the value of x in a break-even
point is 900, we must also find the value of R given by R = px.
Solution: R = px = ₱90●900 =81,000

The point of intersection which is (900, 81,00) on the graph refers to the
break-even point. Rona must sell 900 bottles of milk tea in a month so that
she will not incur profit or loss.

Example 2. A store sells ₱200.00 for 1 screen protector of cellphone. His

fixed cost is ₱10,000.00 and the variable cost is ₱100 per screen protector.
a. How many screen protectors to produce to have a profit of
₱15,000.00? A loss of ₱5,000.00?
b. How many screen protectors will the store break-even?
c. Find the break-even point.

Given: Price = ₱200 FC = ₱10,000 VC = ₱100x

TC = ₱10,000+₱100x R = ₱200x where x = no. of screen protectors

a. P = R-TC
Solution:
₱15,000 = ₱200x - (₱10,000+₱100x) ₱15,000 = ₱200x -₱10,000-₱100x
₱15,000+₱10,000 = ₱200x -₱100x ₱25,000= ₱100x
= 250= x

In obtaining a loss of ₱5,000, set P = -₱5,000 and solve for x

P = R-TC -₱5,000 = ₱200x-(₱10,000+₱100x )
-₱5,000 = ₱200x-₱10,000-₱100x) -₱5,000+₱10,000=₱200x-₱100x
₱5,000 =₱100x = 50 = x

b. In this problem you are asked to find the value of x in break-even point.
In this problem, we will use the formula P = R-TC
Solution: Since break-even point = 0 profit,
we obtain: 0 = ₱200x - (₱10,000+₱100x) 0=₱200x- ₱10,000-₱100x
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 0 = ₱100x-₱10,000 100 = x

Other solution using BEP formula =

= = = 100

This means that Rona needs to sell 100 screen protectors in a month so that
she will not incur loss or profit.

c. Since the value of x = 100, we must find how much will be the revenue R
given the value of x.
Solution: R= p●x
R = ₱200x = ₱200(100) = ₱20,000
Therefore, the break-even point is (100, ₱20,000)

The concept of break-even point is as follows:

 Profit when Revenue > Total Variable cost + Total Fixed cost
 Break-even point when Revenue = Total Variable cost + Total
Fixed cost
 Loss when Revenue < Total Variable cost + Total Fixed cost

V. Activities

Activity 1

Directions: Complete the table below. Let x be the number of units. Use
separate paper for your answers. Show your solutions.

Variable Cost (VC) Fixed Cost (FC) Total Cost= VC+FC

1. 150 3x + 150
2. 15x 15x + 400
3.12x 320
4. 1,230 30x + 1,230
5. 50x 50x + 2,400

Activity 2

Directions: Complete the table below. Let x be the number of units. Use
separate papers for your answers. Show your solutions.
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 Revenue (R)= px Total Cost Profit = R-TC
(TC=VC+FC)
1. 320,000 100,000
2. 5,000 20x-5000
3. 50x 50x-10,000
4. 80x-4,000 30x-1,000
5.10x+3,000 5x +3,500

Activity 3

Directions: Solve the following problems. Use separate papers for your
answers. Show your solutions.

1. Michelle is selling ₱100.00 per tub of ube halaya. It costs ₱50.00 to make
one tub. Her fixed cost in one month is ₱5,500.00.
A. Compute for the break-even point.
B. How many tubs of ube halaya to produce to have a profit of
₱3,500?
C. loss of 1,000?
D. Draw the break-even chart.

2. Arnel has a business of parol. He wants to know how many items of

parol to produce this coming Christmas season. The cost in making 1
parol is ₱500.00. The price of 1 parol is ₱1,000.00. He assumes all his
expenses like electricity, rent, and employees’ salary for a month is
₱30,000.00.
A. Write the revenue function
B. What is the profit function?
C. How many parols are needed to recover the fixed cost?
D. How much is the profit if 300 items were sold?
E. Will the company experience lost if 150 items were sold? Justify
F. Determine the break-even point.
G. Sketch the break-even chart.

VI. Assessment

Multiple Choice. Read each question carefully then write the letter of the
best answer from the given choices. Use separate sheets of paper for your
answer and solution.

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1. Which of the following is a fixed cost?
A. Insurance C. Cost of raw materials
B. Commissions D. Office supplies

2. Which of the following statement is TRUE?

A. Variable cost is the product of price and number of items
B. Fixed cost is the sum of total cost and variable cost.
C. Revenue is the difference of profit and total cost.
D. Salary is an example of variable cost.

3. What will help you determine how changes in output, selling price or
costs will affect the profit levels?
A. Profit and Loss C. Break-even Chart
B. Revenue and Cost D. Break-even Analysis

4. Which of the following is a variable cost?

A. Utilities C. Direct labor cost
B. Rent D. Interest expense
5. Which of the following statement is FALSE about break-even analysis?
A. It is use in forecasting and planning
B. It is use in pricing of the product.
C. It helps to calculate the level of production to reach the level of
profit.
D. Break even point is when the revenue is greater than the total cost.

For items 6-8. A store sells ₱30.00 per product and the variable cost is
₱20.00. The fixed cost is ₱8,300.00.

6. What is the profit if the store sells 970 items?

A. ₱300 B. ₱1,400 C. ₱1,680 D. ₱2,230
7. What quantity of the product should the store sell in order to break-even?
A. 830 B. 640 C. 415 D. 300
8. How many products need to sell to gain a profit of ₱3,000.00?
A. 540 B. 786 C. 1,130 D. 1,560
9. Given the FC = ₱12,000, VC = ₱120, P = ₱250, what will be the function of
the profit?
A. P = 12,000-370x C. P = 250x-12,000+120x
B. P = 370x-12,000 D. P = 130x +12,000
10. If the revenue is greater than the sum of fixed cost and variable cost,
there will be _______.
A. Break-even point C. Loss
B. Loss nor Profit D. Profit

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11. When revenue is equal to the total cost, it is called the _____________.
A. Break-even point C. Loss
B. Loss nor Profit D. Profit

For items 12-15. Jessa is a seller of t-shirts. The price of a t-shirt is ₱200.00
and the cost of each item is ₱90.00. Every month, she needs to pay the rent,
water bill, electricity bill and salary of her employees for about ₱33,000.00
monthly.

12. What is break-even point?

A. (100, ₱200 000) C. (300, ₱60 000)
B. (200, ₱400 000) D. (400, ₱50 000)

13. How many t-shirts to sell to have a profit of ₱30,000.00?

A. 113 B. 573 C. 712 D. 867
14. How many t-shirts to sell to have a loss of ₱3,000.00?
A. 79 B. 112 C. 180 D. 273
15. What is the profit if Jessa sell 1,000 items?
A. ₱77,000 B. ₱98,000 C. ₱123,000 D. ₱150,000

VII. Reflection

Direction: Let us sum up what you have learned in this activity sheet by
writing everything you know about break-even analysis. Use separate sheets
for your answer.

Profit and
Loss

Break- Importance
of Break-
Revenue even even
Analysis Analysis

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Total Cost
VIII. References
Campbell, Cassandra. 2018. Retrieved from
https://www.shopify.com.ph/blog/break-even-analysis

Corporate Finance Institute. Retrieved from

https://corporatefinanceinstitute.com/resources/knowledge/modelin
g/break-even-analysis/
Dagal, Keneth Adrian P.,Lopez, Brian Roy C.,Martin-Lundag, & Leah
C.(2016a). Business Math Teacher’s Manual. Department of
Education. Quezon City. Vibal Group, Inc.
Dagal, Keneth Adrian P.,Lopez, Brian Roy C.,Martin-Lundag, & Leah
C.(2016b). Business Math Learner’s Material. Department of
Education. Quezon City. Vibal Group, Inc.

Kenton, Will. Updated May 29,2020. Fixed Cost. Retrieved from

https://www.investopedia.com/terms/f/fixedcost.asp

Kenton, Will. Updated August 12 ,2020. Variable Cost. Retrieved from

https://www.investopedia.com/terms/v/variablecost.asp

Tutor2u. Business. Retrieved from

https://www.tutor2u.net/business/reference/operations-
introduction-to-break-even-analysis

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 11
Activity 1
Assessment
1. 3x
2. 400 1. a
3. 12x + 320 2. c
4. 30x 3. d
5. 2,400 4. c
5. a
Activity 2
1. 220,000 6. b
2. 20x 7. a
3. 10,000 8. c
4. 50x-3,000
9. b
5. 5x-500
10. d
Activity 3 11. a
1. a. (110, 11 000) 12. c
b. Profit = x=60
13. b
Loss = x =30
c. 14. d
15. a
2. a. R = ₱1,000x
b. P = ₱500x - ₱30,000
c. x = 60
d. ₱120,000
e. No, it has a profit of ₱45,000
f. (60,60 000)
g.
IX. Answer Key
X. Development Team

Development Team of the Learning Activity Sheets

Writer: Aurora T. Sarmiento

Editor: Baby Lala B. Tan / Anthony Rayley M. Cabigting, DEM
Reviewer: Kevin Junior P. Gomez, MBA
Illustrator:
Layout Artist:
Management Team: Engr. Edgard C. Domingo, PhD, CESO V
Leandro C. Canlas, PhD, CESE
Elizabeth O. Latorilla, PhD
Sonny N. De Guzman, EdD
Elizabeth C. Miguel, EdD

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P. Burgos St., Poblacion, Mabalacat City, Pampanga

Telefax: (045) 331-8143

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