TOPIC

BREAK-EVEN ANALYSIS 1
Introduction 2

• This presentation is about break-even

analysis, which is one of the most
basic and important tools in business.
What is Break-even Analysis? 3

• Break-even analysis is a technique

used to determine when a company’s
revenues and expenses will be equal,
which is known as the “break-even
point.”
Benefits of Break-even Analysis 4

• Break-even analysis can help a

company understand how much it
needs to sell in order to cover its
expenses, and can help a company
determine what prices it needs to
charge in order to make a profit.
Cost Structure 5

• The first step in a break-even analysis

is to identify the company’s cost
structure. This includes both fixed
costs, such as rent, and variable costs,
such as materials.
Fixed and Variable Costs 6

• Fixed costs are expenses that remain

the same regardless of the level of
production. Variable costs, on the
other hand, increase or decrease with
the level of production.
Revenue 7

• The second step in a break-even

analysis is to identify the company’s
revenue. This includes both the price
at which the product or service is sold
and the number of units that are sold.
Break-even Point 8

• The break-even point is the point at

which total revenue equals total costs.
This can be calculated by dividing the
total fixed costs by the difference
between the price of the product or
service and the variable cost per unit.
Break-even Analysis in Action 9

• Let’s look at an example of a

company that sells widgets. The
company has fixed costs of $40,000
and variable costs of $2 per widget.
The company sells the widgets for $5
each. The break-even point is 10,000
widgets.
Advantages 10

• Break-even analysis can help a

company determine the most
profitable prices to charge, as well as
which products or services are the
most profitable.
Conclusion 11

• Break-even analysis is a simple but

powerful tool that can help a business
make informed decisions about
pricing, production, and profitability.