**The Break Even Analysis**

**To "**

break even

" means to make no money and lose no money.

break even

" means to make no money and lose no money.

**Total Revenue = Total Expenses**

**Total Revenue = Fixed Costs + Variable Costs**

**Revenue = Price X Units Sold**

Costs that stay the same

Ex. Rent, Utilities, Salaries

The cost of selling each unit

Ex. wholesale cost,

materials

,

ingredients

**Variable Costs = Variable Cost X Units Sold**

The money you bring in from sales

All of the costs to run your business

**Fixed Costs = Rent + Utilities + Salaries + Payroll Tax + Insurance + Interest + Misc/Other**

This is one method of Calculating Revenue Projections for Multiple Products

Product A

Product B

Product C

VC(A) = Cost Per Unit(A) X Units Sold(A)

R(A) = Price(A) X Units Sold(A)

P(A)% = Percentage of total units sold

Revenue = Price(A)Xa + Price(B)Xb + Price(C)Xc + ... + Price(n)Xn

Expenses = FC + VC(A) + VC(B) + VC(C) + ... + VC(n)

Units Sold(A) = Xa

Xa = P(A)% X Total Units Sold

where, P(A)% + P(B)% + P(C)% + ... + P(n)% = 100%

Price is $100

Cost is $40

We project 60% of our sales will come from this product

Price is $250

Cost is $95

We project 25% of our sales will come from this product

Price is $400

Cost is $225

We project 15% of our sales will come from this product

Revenue

= 100(0.6x)

Variable Cost

= 40(0.6x)

Revenue

= 250(0.25x)

Variable Cost

= 95(0.25x)

Revenue

= 400(0.15x)

Variable Cost

= 225(0.15x)

BREAK EVEN POINT

(100(0.6x)

+

250(0.25X)

+

400(0.15x)

= 100,000 +

40(0.6x)

+

95(0.25x)

+

225(0.15x)

60x

+

62.5x

+

60x

= 100,000 +

24x

+

23.75x

+

33.75x

182.5x = 100,000 + 81.5x

101x = 100,000

x = 100,000 / 101

TOTAL REVENUE = TOTAL EXPENSES

Here I am

(-81.5x) = (-81.5x)

100

200

500

400

300

0

1

4

3

2

5

100

200

500

400

300

0

1

4

3

2

5

50,000

100,000

250,000

200,000

150,000

0

500

2,500

2,000

1,500

1,000

50,000

100,000

250,000

200,000

150,000

0

500

2,500

2,000

1,500

1,000

Rev=182.5x

Exp=100,000+81.5x

x = 990.1 units

Price X Units Sold

**Revenue**

**Expenses**

**Units**

**$**

**http://veinternational.org/resources/reference-files/**

**Price = $250**

**Variable Cost = $100**

**Fixed Costs = $450,000**

Revenue = 250X

Expenses = 100X + 450,000

**150X = 450,000**

30,000

**250X = 100X + 450,000**

**x = 30,000 units**

**break even at 30,000 units sold**

**Revenue = Expenses**