business studies

Essay by hadess November 2014

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ACEnet Inc., 2003 Chapter 13 - Break-even Analysis



Analysis Chapter 13

Unit 3

Performance Objectives:

You will work together to solve several sample break-even problems and then calculate your own break-even analysis in Microsoft

® Excel.

Evaluation Criteria:

Successful completion of this chapter requires you to:

 Read about the purpose of break-even.  Solve four practice break-even problems.  Determine which method you will use to calculate a break-even for your


 Calculate a break-even for your business.

ACEnet Inc., 2003 Chapter 13 - Break-even Analysis



Task 1: About Break-evens Read the information below about break-evens.

You've already completed your income statement for your business. Another important component of your business financials is the "break-even analysis." In business, the break-even point is either the amount of sales (in dollars) that you need to make OR the number of items you need to sell to just break-even. If you sell less than this point, you will lose money and if you sell more, you will make a profit.

It's very important to know your break-even point. Even though your company may be making sales, if you continually sell less than your break-even point, your business will eventually fail. There are two ways to calculate a break-even depending on the financial information you have available. Examine the formulas below. One formula uses fixed and variable costs. The other uses operating expense and gross margin. You will use one of these formulas to calculate a break-even point for several practice exercises and eventually for your own business, depending on the type of business you have and the financial information you have available. Below are two simple examples of how to calculate a break-even point. At the end of this benchmark you will use your income statement to...