1 What is breakeven Extension A business buys shorts for 5 and sells them for 18 The business has fixed costs of 5000 How many shorts do they need to sell to breakeven FIXED COSTS PRICE VARIABLE COSTS ID: 735543
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Slide1
Breakeven and Breakeven Charts
1. What is breakeven?Extension: A business buys shorts for £5 and sells them for £18.The business has fixed costs of £5000. How many shorts do they need to sell to breakeven?
FIXED COSTS
(PRICE – VARIABLE COSTS)Slide2
We are learning how to calculate break even and total costs and draw break even charts
ALL draw a graph to show fixed costs, breakeven, variable costs and profit/loss with supportMOST independently use a graph to find the breakeven point for a businessSOME complete a range of tasks on breakeven using graphs and formulas to perform the appropriate analysisSlide3
Breakeven - contribution
ExampleThe “contribution” is the amount from each sale left over after variable costs is taken away. This amount is used to pay for the fixed costs until the fixed costs are paid in full, then this amount will become profit.Slide4
Class example
Apple sells Iphones for £700. They cost £350 in materials to buy and each one made also costs £100 in royalties to patents owned. The total variable costs therefore are…..?Apple has a factory where the Iphones are made. The daily cost of this factory is £100,000. There are also other costs such as sales, shops and other staff. These cost £10,000 a day.
How many phones does the business have to sell in order to break even?
FIXED COSTS
(PRICE – VARIABLE COSTS)Slide5
Lets draw a graph for it…
Amount sold
Revenue (£700 each)
Cost to make that
amount (£450 VC)
Fixed
Costs
Total Costs
Profit/lossSlide6
Lets draw a graph for it…
Amount sold
Revenue (£700 each)
Cost to make that
amount (£450 VC)
Fixed
Costs
Total Costs
Profit/loss
100
70000
45000
110000
155000
-85000
200
140000
90000
110000
200000
-60000
300
210000
135000
110000
245000
-35000
400
280000
180000
110000
290000
-10000
500
350000
225000
110000
335000
15000Slide7
Tasks
Continue handbookExtension sheet