Lesson 3.
Break-
Even
Business Mathematics
Accountancy, Business, and Management
1
Determining the Break-Even Point
➢ The point where revenue and total
cost meet is called the break-even
point.
➢ At this point, a business neither
earns a profit nor experiences loss.
2
How to Determine Break-Even Point
where:
BEP = break-even point
FC = total fixed cost
VC = variable cost per unit
P = price per unit
3
Example 1
1. The total fixed cost of a certain product is
₱36,000 while its variable cost per unit is
₱20. Determine the break-even point if
each unit is sold for ₱80.
Given: total fixed cost = ₱36,000
variable cost per unit = ₱20
price per unit = ₱80
4
Example 1
Solution:
Therefore, the break-even point is at 600 units.
5
Example 2
2. What is the break-even point of a small
snack-house business if their total fixed
cost and variable cost per unit are
₱6,000 and ₱70, respectively, and their
food is priced at ₱150 each order?
total fixed cost = ₱6,000
variable cost per unit = ₱ 70
price per unit = ₱ 150
6
Example 2
Solution:
To reach break-even point, the small snack-house
business must make 75 orders.
7
Example 2
Gina sells halo-halo, and she is considering a new
recipe. She wants to know if introducing a new
recipe will have an impact on her business. Help
her determine the break-even point given the
following:
fixed costs = ₱15,000 (total for the month)
variable cost = ₱25 (per order)
price per unit = ₱55 (per order)
8
Example 2
Solution
Step 1: Identify what is required
in the problem.
You are asked to determine
the break-even point (BEP).
9
Example 2
Solution
Step 2: Identify the given in the problem.
₱15,000 total fixed cost (FC)
₱25 variable cost per order (VC)
₱55 price per order (P)
10
Example 2
Solution
Step 3: Write the working equation.
Step 4: Substitute the given values.
11
Example 2
Solution
Step 5: Find the answer.
Gina has to sell 500 orders of her new recipe to break
even.
12
Keep in Mind
● Break-even happens when there is no
profit or loss or when total sales
equals total cost. It is the point where
revenue and total cost meet. The
formula for computing BPE is as
follows:
13
Practice Your Skills
Let’s Break Even
Ben is a multi-business owner. Below are the total fixed
costs, variable costs per unit, and the prices per unit for the
product he sells and the services he provides. Complete the
table with the missing values.
Business Total Fixed Variable Cost Price Per Unit BEP
Cost Per Unit
Car Wash ₱50,000 ₱120 ₱200
Water Refilling ₱139,500 ₱5 9,300 bottles
Barber Shop ₱60 ₱100 1,625 heads
14
Challenge Yourself Solve the following problems:
1. Walter thinks that he needs at least 318 customers
in order to cover all costs and expenses in his
massage clinic. If each customer has to pay ₱250 per
hour and the total fixed cost and variable cost per
unit are ₱34,980 and ₱140, respectively, is Walter’s
claim correct? (Assume that each customer will be
massaged for 1 hour only.)
Answer:
15
Challenge Yourself Solve the following problems:
2. Vivian sells homemade cookies. The
amount she prepares for the fixed
expenses is ₱6,600. If she allots ₱80 for
each box, how many boxes does she
need to sell in order to break even?
(1 box = ₱180)
Ans:
16
