BREAKEVEN POINT

ANAND R.DESHPANDE
WHAT IS BREAKEVEN?

• The Point at which Revenues = Costs

• Revenues above the breakeven point result in profit
• Revenues below the breakeven point result in loss
• May be measured in units of output or revenue in rupees
• Represents a “Reality Check”
• Is this level of revenue reasonable?
• If not, what actions would yield a reasonable breakeven point?
© DALE R. GEIGER 2011 2
 COST TERMINOLOGY

• Fixed Costs - Costs that do not change in total with the

volume produced or sold
• Variable Costs - Costs that change in direct proportion with
the volume produced or sold
• Mixed Costs - A combination of fixed and variable costs
• Semi-variable Cost - Costs that change with volume
produced, but not in direct proportion

© DALE R. GEIGER 2011 3

 COST TERMINOLOGY

• Fixed Costs - Costs that do not change in total with the

volume produced or sold
• Variable Costs - Costs that change in direct proportion with
the volume produced or sold
• Mixed Costs - A combination of fixed and variable costs
• Semi-variable Cost - Costs that change with volume
produced, but not in direct proportion

© DALE R. GEIGER 2011 4

 COST TERMINOLOGY

• Fixed Costs - Costs that do not change in total with the

volume produced or sold
• Variable Costs - Costs that change in direct proportion with
the volume produced or sold
• Mixed Costs - A combination of fixed and variable costs
• Semi-variable Cost - Costs that change with volume
produced, but not in direct proportion

© DALE R. GEIGER 2011 5

 COST TERMINOLOGY

• Fixed Costs - Costs that do not change in total with the

volume produced or sold
• Variable Costs - Costs that change in direct proportion with
the volume produced or sold
• Mixed Costs - A combination of fixed and variable costs
• Semi-variable Cost - Costs that change with volume
produced, but not in direct proportion

© DALE R. GEIGER 2011 6

 COST TERMINOLOGY

• Fixed Costs - Costs that do not change in total with the

volume produced or sold
• Variable Costs - Costs that change in direct proportion with
the volume produced or sold
• Mixed Costs - A combination of fixed and variable costs
• Semi-variable Cost - Costs that change with volume
produced, but not in direct proportion

© DALE R. GEIGER 2011 7

 THE BREAKEVEN EQUATION
Revenue – Costs = Profit

© DALE R. GEIGER 2011 8

 THE BREAKEVEN EQUATION
Revenue –Costs = Profit
Revenue - Variable Cost - Fixed Cost = Profit

© DALE R. GEIGER 2011 9

 THE BREAKEVEN EQUATION
Revenue –Costs = Profit
Revenue - Variable Cost - Fixed Cost = Profit
Breakeven Point is where Profit = 0
Revenue - Variable Cost - Fixed Cost = 0
Revenue = Variable Cost + Fixed Cost

© DALE R. GEIGER 2011 10

 THE BREAKEVEN EQUATION
Revenue –Costs = Profit
Revenue - Variable Cost - Fixed Cost = Profit
Breakeven Point is where Profit = 0
Revenue - Variable Cost - Fixed Cost = 0
Revenue = Variable Cost + Fixed Cost
Revenue = #Units Sold * Selling Price Rs./Unit
Variable Cost = #Units Sold * Variable Cost Rs./Unit

© DALE R. GEIGER 2011 11

GRAPHIC DEPICTION OF BREAKEVEN
$ 5000
4500
4000
3500
3000
2500 Revenue
2000
1500
1000
500
0
0 25 50 75 100 125 150
12

Units Sold
© DALE R. GEIGER 2011
GRAPHIC DEPICTION OF BREAKEVEN
$ 5000
4500
4000
3500
3000
2500 Column2
Revenue
2000
1500
1000
500
0
0 25 50 75 100 125 150
13

Units Sold
© DALE R. GEIGER 2011
GRAPHIC DEPICTION OF BREAKEVEN
$ 5000
4500
4000
3500
3000
Fixed Cost
2500 Column1
2000 Revenue
1500
1000
500
0
0 25 50 75 100 125 150
14

Units Sold
© DALE R. GEIGER 2011
GRAPHIC DEPICTION OF BREAKEVEN
$ 5000
4500
4000
3500
3000 Fixed Cost
2500 Variable Cost
Total Cost
2000
Revenue
1500
1000
500
0
0 25 50 75 100 125 150
15

Units Sold
© DALE R. GEIGER 2011
GRAPHIC DEPICTION OF BREAKEVEN
$ 5000
4500
4000
3500
3000 Fixed Cost
2500 Variable Cost
Total Cost
2000
Revenue
1500
1000
500
0
0 25 50 75 100 125 150
16

Units Sold
© DALE R. GEIGER 2011
GRAPHIC DEPICTION OF BREAKEVEN
$ 5000
4500
4000
3500
3000 Fixed Cost
2500 Variable Cost
Total Cost
2000
Revenue
1500
1000
500
0
0 25 50 75 100 125 150
17

Units Sold
© DALE R. GEIGER 2011
GRAPHIC DEPICTION OF BREAKEVEN
$ 5000
4500
4000
3500
3000 Fixed Cost
2500 Variable Cost
Total Cost
2000
Revenue
1500
1000
500
0
0 25 50 75 100 125 150
18

Units Sold
© DALE R. GEIGER 2011
•THANK YOU.GOD BLESS YOU…