![]() Your break-even chart is now complete with the information required to interpret the break-even point! The point where the total revenue line and the total costs line meet is your break-even point. To calculate total revenue multiply the sales price per unit and the total output. With all the cost lines plotted, the total revenue line can be added. Now the total costs line must be added – this is the value of the fixed costs and variable costs combined and is essential to calculating the break-even point. Note that the addition of this line is not always essential but allows all the information to be seen. Therefore this will be a diagonal line as it is directly proportional to the output. With your fixed costs plotted, it is now possible to plot the variable costs – this is found by calculating the variable costs per unit multiplied by the number of units sold. ![]() Secondly, you must plot the fixed costs line – this will be a horizontal line as the costs are permanently fixed at a given figure, regardless of the product output. To construct a break-even chart, you must begin with a basic axis with unit output on the horizontal axis and costs and revenue on the vertical axis. Here is a breakdown on how to easily create your business break even chart. How Do You Create a Break-Even Chart? – A Step by Step Guide Sales price is what is charged for one unit. Variable costs are expenses that are directly affiliated with production (for example wages and raw materials). The break-even point can be determined through the following formula: FIXED COSTS ÷ (SALES PRICE PER UNIT – VARIABLE COSTS PER UNIT)įixed costs are the expenses that do not fluctuate (for example monthly rent). What is the Break Even Formula in Business? Everything below this point is produced at a loss and everything above this point is produced at a profit. This is the point where the costs and revenue are equal. You can interpret a break-even chart by locating the point where the total costs of the business meets the line for total revenue. The break-even point can be calculated by dividing the total costs affiliated with production, by the revenue per individual unit, minus the variable expenses per unit. Determining the break-even point informs a business whether they’re operating at a loss or a profit. The break-even point is the point at which a company’s income is equal to their costs. What if the break-even point is negative?.To ensure your business is on track with it’s finances, it’s imperative that the break-even point is calculated accurately and taken into account of the overall company finances. ![]() For businesses, the break even point is a crucial element of any financial assessment. ![]()
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