Sunday, 7 March 2010

Drawing a break-even chart:

Once you have the information of the Fixed costs, variable costs, sales revenue (=quantity sold x price) and total costs, you can create a Break-even Chart out of it.

It takes the following steps to construct the graph:

1.Label the x-axis as "output", and the y-axis as "money".
2.The fixed cost is always a horizontal line as it doesn't change at any level of output.
3.Plot the variable cost line by multiplying a handy number(as output) with the variable cost per unit.
4.The total cost is parallel to the variable cost, which begins from where the fixed cost line starts.

5.Where the revenue and total cost lines cross is the break-even point.

This is an example of a break-even chart:

2 comments: