First, we drew two axes: a vertical one displaying costs and a horizontal one displaying quantity.These are the steps we followed drawing the break-even chart for the company X: 7 - Labelled break-even chart exampleįigure 7 illustrates a labelled break-even chart for company X where: How many chairs per month does the company have to produce and sell to reach the break-even level of output?įig. The rental cost of a factory is £12,000 a month and bills are £3,000 a month. Break-even graph showing revenue, total costs, fixed costs, profit and loss. Let's take a look at an example of a break-even analysis chart. Everything shown below this point is loss, and everything above it is profit. The break-even point is the quantity (number of units) at a level where total costs and revenue intersect. The break-even point is the intersection point of the total costs and revenues lines.įigure 6 illustrates the break-even point (□). Now we need to mark the break-even point. Depending on its value, the line can have a more vertical or horizontal inclination. Since revenue is directly related to quantity, the line will start at the intersection point of the horizontal and vertical axes and increase gradually.įigure 5 illustrates a line indicating revenue (R). Now we need to draw a line indicating revenue. Since variable costs rise and fall in direct proportion to the number of units, the line will start at the intersection point of the axes and gradually increase. Now we need to draw a line indicating variable costs. Step 3: Draw a line indicating variable costs Depending on its value, the line can be lower or higher on the chart. Since fixed costs remain the same (in the short term), regardless of the number of units produced, this line will be horizontal and parallel to the axis that displays quantity.įigure 2 illustrates a horizontal line indicating fixed costs (FC) which are constant. Now we need to draw a line indicating fixed costs. Step 2: Draw a line indicating fixed costs Horizontal axis - this one will display quantity.įigure 1 illustrates the two axes in the break-even chart (cost and quantity). Vertical axis - this one will display costs. Table 1 - Types of Costs Definitions and Examples How to draw a break-even analysis chart?ĭrawing a break-even chart consists of six steps: Rent and rates, raw materials used in production and direct labour added together Raw materials used in production, direct labourįixed costs and variable costs added together TermĬosts that remain the same regardless of the number of units producedĬosts that rise and fall in direct proportion to the number of units produced Each of them is represented as a line that indicates its value depending on the level of output. The break-even chart includes four variables: fixed costs, variable costs, total costs, and revenue. It is the number of units a firm has to produce and sell to recover its total costs.
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