Sales below this point represent a loss, and everything above it is profit. Where the revenue line crosses the total cost line is the break-even point - costs and revenue are the same. To draw the revenue line, simply join these two points with a straight line. The start of the revenue line is the origin point where the axes cross. Use this as the right-hand point of the revenue line. First choose a reasonable maximum number of units possibly sold to calculate the maximum possible revenue.įor example, if the sales price is £10 and a maximum of 200 items are likely to be sold, the calculation is: The revenue, is the price per unit sold multiplied by the number of units sold (output). The break-even point is when total revenues and total costs are equal, that is, there is no profit but also no loss made. This is because the fixed cost added to the variable cost gives the total cost.

Because the variable costs line is drawn above the fixed costs line, it becomes the total costs line. The reader can see the unit volume sales level needed to achieve break even, and then needs to decide whether it is. The chart is useful for portraying the ability of a business to earn a profit with its existing cost structure. Below is the CVP graph of the example above: Explanation: The number of units is on the X-axis (horizontal) and the dollar amount is on the Y-axis (vertical). Using graph paper, it is possible to chart the financial data that allows the break-even output to be measured. The chart plots revenue, fixed costs, and variable costs on the vertical axis, and volume on the horizontal axis. break-even analysis: graph with icons and business owner running and. Then plot a line to represent variable cost starting at the same point as the fixed costs line on the left. The graphical representation of unit sales and dollar sales needed to break even is referred to as the break-even chart or cost-volume-profit (CVP) graph. Search from 119 Breakeven stock photos, pictures and royalty-free images from. Onto this, plot a horizontal fixed costs line - it is horizontal because fixed costs do not change with output. Choose a reasonable maximum cost and maximum sales shown on each axis, so the BEP is clearly visible. Ĭonstruct a chart with output (units) on the horizontal (X) axis, and costs and revenue on the vertical (Y) axis. In this example, assume that the variable cost per unit is £6 and there are 200 units, so the variable cost is £1,200. To calculate the variable cost, multiply variable cost per unit by number of units. The graph above demonstrates a break-even point (BEP) of 100 units. A break-even graph shows the revenue, costs, number of products sold and BEP.

A1: Sales - This is the label for the Sales section of the. Create the layout for your break even sheet. Construct and interpret a break-even chartĪ break-even graph shows a break-even point (BEP) visually. A breakeven chart is a chart that shows the sales volume level at which total costs equal sales. This sheet will house your main BEP (Break Even Point) chart.

Break even graph