A business can work out how what volume of sales it needs to achieve to cover its costs.
This is known as the break even point.
This can be done two ways mathematically and using a breakeven chart.
1. Breakeven chart
A break-even chart plots the sales revenue, different costs and helps identify the break
even point and margin of safety.
Cuddly Teddy Bears produce and sell a range of teddy bears and are now ready to
introduce a new bear to the range – Sporty Bear
It has worked out the following costs
Fixed costs £31,000
Variable costs = £6.10 per bear
They are going to sell at £15 per bear
Draw a breakeven table calculating figures for sales of
0, 500, 1000,1500,2000,2500,3000 and 3500 bears
Draw the break even graph.
Draw up a new breakeven table and plot a new break even graph with the following
Fixed costs = £29,700
Variable costs = £ £6.20
Price = £14.50