BUSINESS MATHEMATICS – BREAK EVEN POINT
Buying and selling is a type of business that buys at wholesale and later sells the products at retail. They make a profit
by selling the products at prices that are higher than their purchase costs.
Break-even point is the point where a business neither makes a profit nor a loss. To determine the number of units to
be sold to break-even would be, fixed cost divide it by the difference of unit price less variable cost per unit.
Therefore, in this activity you will learn how to solve buying and selling products and break-even point problems.
❖ It is revenue above and beyond expenses.
❖ Revenue is earned income from a business source or occupation. Income can be passive, such as interest and
dividends.
❖ Expenses may be fixed or variable –
Fixed expenses do not vary based on units sold.
• They include rent, utilities, insurance, and licenses.
• Labor can be a fixed expense if workers are paid salary or hourly, not by the job.
- Variable expenses are related to production of each unit.
• They include raw materials, packaging and per-unit expenses.
• Labor can be a variable expense if workers are paid per product produced or per service rendered.
❖ Profit is the amount of revenue you get to keep after all expenses are paid. Revenue is the amount of money a
business makes. Expenses are the costs incurred to make the revenue, and profit is the remaining money after
expenses are paid.
❖ If revenue is the money earned, and expenses are paid from the revenue, then profit is the remaining revenue left
after expenses:
Profit = Revenue – Expenses
We can use algebra to reposition the variables for a new formula:
Revenue = Expenses + Profit
This is the same formula, just written in a different way. Notice that the left side of the equal sign shows how much
money is earned, and the right side shows where it all goes
❖The break-even point is the point where Revenue = Expenses and Profit = 0.
Exercise No.3: Worded Problem on Break-even Point
1. Find the break-even point in units and in peso given that the unit price of a certain commodity is ₱18.00;
variable cost, ₱6.00; and total fixed cost, ₱15,000.00. Identify (What is being asked?):
2. Mang Juan, owner of a burger business. It cost ₱20.00 to make one burger. He sells each burger for ₱25.00.
He incurred an expense worth ₱10,000.00 per month. What is the break-even point in number of units would be?
3. Ms. Gia, owner of a milk tea stall. To make a cup of milk tea costs her ₱35.00. She sell it at ₱45.00. It cost her
₱5,000.00 to rent for the space of the milk tea stall. How many cups of milk tea did she have to sell to breakeven?
Identify (What is being asked?):
1
1. Blue Corp. shows monthly fixed costs of PhP1,797 and per-unit cost of PhP9.28. It sells 411 units in a month.
What is the minimum price Blue Corp. must sell each unit for to break even?
2. A start-up company has the following expenses:
Rent = PhP1,100
Utilities = PhP265
Material and assembly = PhP12.65/unit
Monthly labor = PhP625
If its product sells for PhP29.99/unit, how many units must it sell to break even?
3. I sell a product for PhP24.75 and fill orders averaging 37 units per day. My cost to produce and assemble each item
is PhP3.11. If I am open for business five days per week, what is my contribution margin per unit?
4. A company sells 900 units/month at PhP49.99 each, with an PhP18.12 per-unit cost and PhP2,175 monthly fixed
costs. Is this company making a profit?
5. Zyleron Corp. shows monthly fixed costs of PhP37,210 and a per-unit cost of PhP34.79. It sells 275 units in a
month. What is the minimum price Zyleron Corp. must sell each unit for to break even?
6. A start-up company has the following expenses:
Rent = PhP875
Utilities = PhP115
Material and assembly = PhP4.75/unit Monthly
labor = PhP480 If its product sells for PhP18.99/unit, how many units must it sell to break even?
