Break Even Graph

• What is the break-even point (BEP) in business?

  The point where revenue equals total costs
• Why do businesses calculate their break-even point?

  To determine when they start making a profit
• What does a break-even graph illustrate?

  • Revenue
  • Costs
  • Number of products sold
  • Break-even point (BEP)
• What does the horizontal fixed costs line represent on the graph?

  Fixed costs that don’t change with output
• How is the total costs line derived on the break-even graph?

  By adding fixed costs to variable costs
• How do you plot the revenue line on the break-even graph?

  Multiply sales price by number of units sold
• What does it mean when the revenue line crosses the total cost line?

  It indicates the break-even point
• What happens below the break-even point on the graph?

  It represents a loss for the business
• What happens above the break-even point on the graph?

  It represents a profit for the business
• What are the key components needed to create a break-even graph?

  • Fixed costs line
  • Variable costs line
  • Total costs line
  • Revenue line
  • Break-even point (BEP)