Model Development

Break Even
Total Cost= Total fixed cost + variable cost (TC= Cf + Cv)
TC= Total Cost
Cf= Fixed Cost
Cv= Variable Cost
EXAMPLE:
Cf: 10,000
Cv: 8/pants
FIND TC if you produce 400 pcs (volume)
TC= Cf + Cv
= 10,000 + 8 (400)
= 10,000+3,200
TC= 13,200

Total Revenue = Total Income

Formula: TR= VP
Where: V= volume
P= price per unit
TR=VP
= 400 (8)
TR= 3,200

Profit is the amount earned from the business

Profit (Z) = VP – ( Cf – Cv) or simply as this
Profit (Z)/Loss= Total Revenue – Total Cost
= 3,200 – 13,200
Profit (Z) / LOSS = (10,000) we have a loss
WHAT IF? THERE’S A CHANGES IN THE PRICE PER UNIT
Total Revenue = Total Income
Formula: TR= VP
Where: V= volume
P= price per unit
TR=VP
= 400 (23)
TR= 9,200
Profit (Z)/Loss= Total Revenue – Total Cost
= 9,200 – 13,200
Profit (Z) / LOSS = (4,000) we have a loss

THIS IS THE BREAK EVEN:

V= Cf / P- Cv
Cf = (Fixed cost)
P = (Price per Unit)
Cv = (Variable Cost)
V= Cf / P- Cv
V= 10,000 / 23-8
= 10,000 / 15
V = 667