A N D DISA

E S DV
A G A
T N

TA
VA

GE
AD

S
OF BREAK-EVEN
POINT
BY FLAVIA VASQUEZ
WHAT IS BREAK-EVEN
POINT?
THIS ANALYSIS TELLS YOU HOW MANY
UNITS OF A PRODUCT MUST BE SOLD
TO COVER FIXED AND VARIABLE
PRODUCTION COSTS.THE BREAK-EVEN
POINT IS THE LEVEL OF SALES AT WHICH
TOTAL REVENUES EQUAL TOTAL COSTS,
WITH NO PROFIT OR LOSS.
 EXAMPLE
PANCHITA COMPANY: WATER BREAK-EVEN QUANTITY = $100,000 /
COMPANY $12 - 2
BREAK-EVEN QUANTITY = $100,000 /
THE FIXED COSTS ADD UP TO $10
$100 000. THE VARIABLE COST BREAK-EVEN QUANTITY =10,000
IS $2 PER UNIT THE WATTER
BOTTLE IS SOLD AT A PRICE OF TOTAL COST (V+F)
$12. VC = Q X COST PER UNIT
BREAK-EVEN QUANTITY = FIXED TC = FC + VC
COSTS / (SALES PRICE PER
UNIT – VARIABLE COST PER VC = 10,000X$2
UNIT) VC = $20,000
TC = $100,00 + $20,000
TC = $120,000
 EXAMPLE
PANCHITA COMPANY:WATTER
COMPANY

PANCHITA COMPANY WOULD

NEED TO SELL 10,000 UNITS OF
WATTER BOTTLES TO BREAK
EVEN
ADVANTAGE VS.
DISADVANTAGE
IF YOU HAVE A BUSINESS, YOU
HELPS YOU TO SEE HOW MUCH
SHOULD NOT SPEND YOUR
YOUR BUSINESS IS GROWING
CAPITAL INCOME ON
PAYMENTS, MARKET
PURCHASES, ETC.
THANK YOU