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Business Tools For Career Readiness

This document discusses break-even analysis, which is a technique used in direct costing to calculate the break-even point. It requires classifying costs as either fixed costs, which do not change with output, or variable costs, which do change with output. An example is provided where the break-even point for a pizza business with $4,000 in monthly fixed costs is calculated to be 625 pizzas sold or $6,250 in sales revenue.

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Mauricio Huacho Checa
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41 views11 pages

Business Tools For Career Readiness

This document discusses break-even analysis, which is a technique used in direct costing to calculate the break-even point. It requires classifying costs as either fixed costs, which do not change with output, or variable costs, which do change with output. An example is provided where the break-even point for a pizza business with $4,000 in monthly fixed costs is calculated to be 625 pizzas sold or $6,250 in sales revenue.

Uploaded by

Mauricio Huacho Checa
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

Business Tools for Career Readiness

Finance for
Non-Financial Professionals
Module 2

with David Standen, D.B.A.

Break-Even Analysis
Using Direct Costs to Calculate Break-Even

Calculating Break-Even
Technique associated with a direct costing
approach

Calculating Break-Even
Technique associated with a direct costing
approach
Requires a company to classify costs as either:
o Fixed Costs - Costs uninfluenced by volume
of output and/or sales
o Variable Costs - Costs that vary directly with
volume of output and/or sales

Break-Even Example

Break-Even Example

Selling price = $10 per pizza


Cost of ingredients = $3.60 per pizza
Contribution = $6.40 per pizza

Break-Even Example
Price = $10

Variable Costs = $3.60


Contribution = $6.40
Fixed Costs = $4,000 / mo

$,
$.

= 625 pizzas sold


or $6,250

Break-Even Example
Price = $10

Variable Costs = $3.60


Contribution = $6.40
Fixed Costs = $4,000 / mo

$,
$.

= 625 pizzas sold


or $6,250

Standard Break-Even = 625 pizzas sold


Monetary Break-Even = $6,250

Break-Even Analysis

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