LEARNING ACTIVITY SHEET ¿ Cost (FC )

ABM 11 BUSINESS MATHEMATICS (Q1-WK7) Price( P) per unit −Variable Cost (VC ) per unit
Break-even Analysis
The Break-even Chart
IV. Discussion
The diagram, the X axis is the level of production(output) and the Y-axis is the income.
To understand the break-even analysis, there are few definitions that you need to know. 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
1. Fixed cost (FC)- refers to the expenses that does not change regardless of the amount of point of intersection A. It means that the costs are exactly equal to the income, thus there is
goods or services produced or sold. Examples are rent, salaries of the employees, utilities, no profit or loss made.
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 Example 1: Rona is planning to run a milk tea shop where she plans to sell each bottle at
R=p●x where p is the price and x is the number of the units. ₱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,
At break-even, total cost TC is equal to revenue R (TC=R). a. What is the break-even quantity?
b. How much profit will he earn if she sells 300 bottles? 1,500 bottles?
Break-even analysis is very important in profit and loss. It will help you to determine c. How many bottles must be sold to earn a profit of ₱50,000?
when your company, or a product or services will be profitable. For example, how many d. Draw the break-even chart.
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 Solution:
profit will be equal to zero. Given: Price (p) = ₱90
FC = ₱45,000
The point at which the business will neither earn a profit nor experience loss is known as VC = VC per unit ● number of units
the break-even point (BEP). Anything you sell beyond your break-even point will add a = ₱40x where x is the number of bottles of milk tea
profit. TC = FC+VC = ₱45,000+ ₱40x
Break-even Point (BEP) Formula = R = p●x = ₱90●x = ₱90x

1
a. At break-even, TC=R, so  In this solution, P>0 when x = 1,500, it means that the business will have
Step 1: Write the equation ₱45,000+ ₱40x = ₱90x a profit of ₱30,000.
Step 2: Combine like terms ₱45,000 = ₱90x - ₱40x
Step 3: Simplify ₱45,000 = ₱50x
c. In this problem, you are asked to find the value of x to earn a profit of ₱50,000 in a
₱ 45,000 ₱ 50 x
Step 4: Solve for x = 900 = x month.
₱ 50 ₱ 50 Solution: P = R – TC, where P = ₱50,000.
Use the function derived from Step 2 in b.1. P = ₱50x – ₱45,000
Other solution using BEP formula = Step 1: Substitute the value of P ₱50,000= ₱50x – ₱45,000
¿ Cost (FC ) Step 2: Simplify ₱50,000+₱45,000 = ₱50x
Price( P) per unit −Variable Cost (VC ) per unit ₱95,000 = ₱50x
₱ 95,000 ₱ 50 x
=
₱ 45,000 ₱ 45,000 ₱ 50 ₱ 50
= = = 900
₱ 90−₱ 40 ₱ 50 1,900 = x

 To earn a profit of ₱50,000, Rona must sell 1,900 bottles of milk tea in a
This implies that 900 bottles of milk tea must be sold monthly so that Rona will not gain
month
any profit or loss.
d. Recall that at break-even, TC =R. Since the value of x in a break-even point is 900, we
b. Profit = Revenue – Cost or P = R - TC
must also find the value of R given by R = px.
b.1. The value of x = 300 and you want to know the profit.
Solution: R = px = ₱90●900 =81,000
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 The point of intersection which is (900, 81,00) on the graph refers to the break-even point.
of ₱30,000. Rona must sell 900 bottles of milk tea in a month so that she will not incur profit or loss.
b.2. You are going to solve for the profit when x = 1,500.
Solution: P = R - TC Example 2. A store sells ₱200.00 for 1 screen protector of cellphone. His fixed cost is
Step 1: Substitute the value of x in the profit function from Step 2:b.1. ₱10,000.00 and the variable cost is ₱100 per screen protector.
P = ₱50x – ₱45,000 a. How many screen protectors to produce to have a profit of ₱15,000.00? A loss
P = ₱50(1,500) – ₱45,000 of ₱5,000.00?
Step 2: Simplify P = ₱75,000 – ₱45,000 = ₱30,000 b. How many screen protectors will the store break-even?
c. Find the break-even point.

2
 of x.
Given: Price = ₱200 FC = ₱10,000 VC = ₱100x Solution: R= p●x
TC = ₱10,000+₱100x R = ₱200x where x = no. of screen protectors R = ₱200x = ₱200(100) = ₱20,000
Therefore, the break-even point is (100, ₱20,000)
a. P = R-TC
Solution: The concept of break-even point is as follows:
₱15,000 = ₱200x - (₱10,000+₱100x) ₱15,000 = ₱200x -₱10,000-₱100x
₱15,000+₱10,000 = ₱200x -₱100x ₱25,000= ₱100x  Profit when Revenue > Total Variable cost + Total Fixed cost
₱ 25,000 ₱ 100 x  Break-even point when Revenue = Total Variable cost + Total Fixed cost
= 250= x  Loss when Revenue < Total Variable cost + Total Fixed cost
₱ 100 ₱ 100
V. Activities
In obtaining a loss of ₱5,000, set P = -₱5,000 and solve for x
P = R-TC -₱5,000 = ₱200x-(₱10,000+₱100x )
Activity 1
-₱5,000 = ₱200x-₱10,000-₱100x) -₱5,000+₱10,000=₱200x-₱100x
₱ 5,000 ₱ 100 x
₱5,000 =₱100x = = 50 = x Directions: Complete the table below. Let x be the number of units. Use separate paper for
₱ 100 ₱ 100 x your answers. Show your solutions.

b. In this problem you are asked to find the value of x in break-even point. In this problem, Variable Cost (VC) Fixed Cost (FC) Total Cost= VC+FC
we will use the formula P = R-TC
1. 150 3x + 150
Solution: Since break-even point = 0 profit,
2. 15x 15x + 400
we obtain: 0 = ₱200x - (₱10,000+₱100x) 0=₱200x- ₱10,000-₱100x
3.12x 320
₱ 10,000 ₱ 100 x
0 = ₱100x-₱10,000 = 100 = x 4. 1,230 30x + 1,230
₱ 100 ₱ 100
5. 50x 50x + 2,400
Other solution using BEP formula =
¿ Cost (FC )
Activity 2
Price( P) per unit −Variable Cost (VC ) per unit
Directions: Complete the table below. Let x be the number of units. Use separate papers for
₱ 10,000 ₱ 10,000 your answers. Show your solutions.
= = = 100
₱ 200−₱ 100 ₱ 100 Revenue (R)= px Total Cost (TC=VC+FC) Profit = R-TC
1. 320,000 100,000
This means that Rona needs to sell 100 screen protectors in a month so that she will not
2. 5,000 20x-5000
incur loss or profit.
3. 50x 50x-10,000
c. Since the value of x = 100, we must find how much will be the revenue R given the value 4. 80x-4,000 30x-1,000

3
5.10x+3,000 5x +3,500 B. Fixed cost is the sum of total cost and variable cost.
C. Revenue is the difference of profit and total cost.
Activity 3 D. Salary is an example of variable cost.
3. What will help you determine how changes in output, selling price or costs will affect
Directions: Solve the following problems. Use separate papers for your answers. Show the profit levels?
your solutions. A. Profit and Loss C. Break-even Chart
B. Revenue and Cost D. Break-even Analysis
1. Michelle is selling ₱100.00 per tub of ube halaya. It costs ₱50.00 to make one tub. Her 4. Which of the following is a variable cost?
fixed cost in one month is ₱5,500.00. A. Utilities C. Direct labor cost
A. Compute for the break-even point. B. Rent D. Interest expense
B. How many tubs of ube halaya to produce to have a profit of ₱3,500? 5. Which of the following statement is FALSE about break-even analysis?
C. loss of 1,000? A. It is use in forecasting and planning
D. Draw the break-even chart. B. It is use in pricing of the product.
C. It helps to calculate the level of production to reach the level of profit.
2. Arnel has a business of parol. He wants to know how many items of parol to produce D. Break even point is when the revenue is greater than the total cost.
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’ For items 6-8. A store sells ₱30.00 per product and the variable cost is ₱20.00. The fixed
salary for a month is ₱30,000.00. cost is ₱8,300.00.
A. Write the revenue function
B. What is the profit function? 6. What is the profit if the store sells 970 items?
C. How many parols are needed to recover the fixed cost? A. ₱300 B. ₱1,400 C. ₱1,680 D. ₱2,230
D. How much is the profit if 300 items were sold? 7. What quantity of the product should the store sell in order to break-even?
E. Will the company experience lost if 150 items were sold? Justify A. 830 B. 640 C. 415 D. 300
F. Determine the break-even point. 8. How many products need to sell to gain a profit of ₱3,000.00?
G. Sketch the break-even chart. 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?
VI. Assessment A. P = 12,000-370x C. P = 250x-12,000+120x
B. P = 370x-12,000 D. P = 130x +12,000
Multiple Choice. Read each question carefully then write the letter of the best answer from 10. If the revenue is greater than the sum of fixed cost and variable cost, there will be
the given choices. Use separate sheets of paper for your answer and solution. _______.
A. Break-even point C. Loss
1. Which of the following is a fixed cost? B. Loss nor Profit D. Profit
A. Insurance C. Cost of raw materials
B. Commissions D. Office supplies 11. When revenue is equal to the total cost, it is called the _____________.
2. Which of the following statement is TRUE? A. Break-even point C. Loss
A. Variable cost is the product of price and number of items B. Loss nor Profit D. Profit

4
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