25- break even
TRANSCRIPT
8/13/2019 25- Break Even
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STARTER:Carly wantsto set up aBusiness makingApple Pies.
What are herFixed
and VariableCosts?
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Break even
Lesson Outcomes:• To understand how to work out the break-even point
mathematically
• To understand how to construct a break even chart
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Recap
• Sales Revenue
• Fixed cost
•
Variable cost• Total cost
• Average cost
• What’s another name for sales revenue?
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Work out the costs and the salesrevenue
Fixed costs
Total variablecosts
Total costs
Sales revenue
0 units 100 units 200 units 300 units
Fixed costs = £2,000Variable costs = £10 per unitSelling price = £20 per unit
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Work out the costs and the salesrevenue
Fixed costs
Total variablecosts
Total costs
Sales revenue
£2,000 £2,000 £2,000 £2,000
0 units 100 units 200 units 300 units
Fixed costs = £2,000Variable costs = £10 per unitSelling price = £20 per unit
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Using a grid to help you
Fixed costs
Total costs
Sales revenue
£2,000
£0
£2,000
£1,000
£2,000
£2,000
£2,000
£3,000
0 100 200 300
Fixed costs = £2,000Variable costs = £10 per unitSelling price = £20 per unit
Total variablecosts
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Using a grid to help you
Fixed costs
Total costs
Sales revenue
£2,000
£0
£2,000
£2,000
£1,000
£3,000
£2,000
£2,000
£4,000
£2,000
£3,000
£5,000
0 100 200 300
Fixed costs = £2,000Variable costs = £10 per unitSelling price = £20 per unit
Total variablecosts
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Using a grid to help you
Fixed costs
Total costs
Sales revenue
£2,000
£0
£2,000
£0
£2,000
£1,000
£3,000
£2,000
£2,000
£2,000
£4,000
£4,000
£2,000
£3,000
£5,000
£6,000
0 100 200 300
Fixed costs = £2,000Variable costs = £10 per unitSelling price = £20 per unit
Total variablecosts
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Fixed costs
Number of units
Costs andsalesRevenue£
Fixed costs£2,000
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Variable costs
Number of units
Costs andsalesRevenue£
Fixed costs
Variable costs
£2,000
0 100
£1,000
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Total costsCosts andsalesRevenue£
Fixed costs
Total costs
Variable costs
Number of units
0 100
£2,000
£1,000
£3,000
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Sales revenueCosts andsalesRevenue£
Fixed costs
Total costs
Variable costs
Sales revenue
Number of units
0 100200
£2,000
£1,000
£3,000
£4,000
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Break-even pointCosts andsalesRevenue£
Fixed costs
Total costs
Variable costs
Sales revenue
Number of units
0 100 200
£2,000
£1,000
£3,000
£4,000
Break-evenPoint
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Question 1
Fixed costs = £10,000
Variable costs = £10 per unit
Selling price = £50 per unit
• Work out the break even point
• Plot a break-even graph – Maximum y value is £15,000
– Maximum x value is 300
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Using a grid to help you - 1
Fixed costs
Total costs
Sales revenue
0 100 200 300
Fixed costs = £10,000Variable costs = £10 per unit
Selling price = £50 per unit
FormulasFixed costs stay the sameTotal variable costs = variable costs x number of unitsTotal Costs = fixed costs + total variable costsSales revenue = selling price x number of units
Total variablecosts
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Question 2
Fixed costs = £5,000
Variable costs = £10 per unit
Selling price = £20 per unit
• Work out the break even point
• Plot a break-even graph – Maximum y value is £12,000
– Maximum x value is 600
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Using a grid to help you - 2
Fixed costs
Total costs
Sales revenue
0 200 400 600
Fixed costs = £5,000Variable costs = £10 per unit
Selling price = £20 per unit
FormulasFixed costs stay the sameTotal variable costs = variable costs x number of unitsTotal Costs = fixed costs + total variable costsSales revenue = selling price x number of units
Total variablecosts
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Question 3
Fixed costs = £7,000
Variable costs = £7.50 per unit
Selling price = £21.50 per unit
• Work out the break even point
• Plot a break-even graph – Maximum y value is £13,000
– Maximum x value is 600
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Using a grid to help you - 3
Fixed costs
Total costs
Sales revenue
0 200 400 600
Fixed costs = £7,000Variable costs = £7.50 per unit
Selling price = £21.50 per unit
FormulasFixed costs stay the sameTotal variable costs = variable costs x number of unitsTotal Costs = fixed costs + total variable costsSales revenue = selling price x number of units
Total variablecosts
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Question 4
Fixed costs = £2,000
Variable costs = £2 per unit
Selling price = £7.40 per unit
• Work out the break even point
• Plot a break-even graph• Units sold 400
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Question 5
Fixed costs = £23,000
Variable costs = £250 per unit
Selling price = £500 per unit
• Work out the break even point
• Plot a break-even graph• Units sold 150
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Using a grid to help you - 5
Fixed costs
Total costs
Sales revenue
0 50 100 150
Fixed costs = £23,000Variable costs = £250 per unit
Selling price = £500 per unit
FormulasFixed costs stay the sameTotal variable costs = variable costs x number of unitsTotal Costs = fixed costs + total variable costsSales revenue = selling price x number of units
Total variablecosts
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Extension task – mathematically
work out the break-even pointfor all the grids using theformula on the next slide
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How to calculate break-even pointwithout drawing a graph
• Break-even point = Fixed costs
Contribution
• Contribution = selling price – variable cost