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Business Math

Week 8
Reference WHLP
Learning Competencies:

✓Determine the break-even

point.
✓Solve problems involving
break-even analysis.
 Activity: “The Previous One!”
Ex. M J G F - LIFE
1) G J Y F E_D P T U - FIXED COST
2) SFWFOVF - REVENUE
3) QSPGJU - PROFIT
4) C S F B L - F W F O - BREAK-EVEN
5) MPTT - LOSS
6) W B S J B C M F_D P T U - VARIABLE COST
Break-Even
Analysis
Break-Even Analysis

• This analysis is significant in examining the

relationship among various elements such as
costs (variable and fixed), prices, and
volume of sales that lead to the best
combination that will make the revenue
and total cost equal.
 Variable Cost (VC)
Fixed Cost (FC)
✓ The cost to necessary to ➢It is the cost of
keep the business running producing the product.
regardless of the sales
volume. Total Cost (TC)
✓ It includes rent, salaries of
employees, loans, basic
utilities, and other TC = FC + VC
expenditures.
 ➢ It is usually seen on the top item in an
Revenue income (profit or loss) statement for
which all costs and expenses is
subtracted to arrive at net income.
➢The total income produced by a given source;
➢It is the product of the price (p) and the quantity
sold.
Formula: R =p.x
where in p = price and x = the number of unit
Profit = Revenue - Cost
Break-even
✓ At break-even, total cost is
compared to the total revenue.
✓ Thus, at break-even
TC = R.
 ✓TR > TC means Profit
Break-Even Point ✓TR < TC means Loss
✓TR = TC means Break-even
(BEP)

➢The point at which

the business will
neither earn a profit
nor experience loss.
 TOTAL TOTAL
R1 R2 VC FC REMARKS
REVENUE COST

P 75,000 P 75,000 𝑃 150,000 P 50,000 P 75,000 𝑃 125,000 𝑇𝑅 > 𝑇𝐶 𝑷𝒓𝒐𝒇𝒊𝒕

P 95,000 P 55,000 𝑃 150,000 P 100,000 P 90,000 𝑃 190,000 𝑇𝑅 < 𝑇𝐶 𝑳𝒐𝒔𝒔

𝑩𝒓𝒆𝒂𝒌
P 95,000 P 85,000 𝑃 180,000 P 90,000 P 90,000 𝑃 180,000 𝑇𝑅 = 𝑇𝐶 − 𝒆𝒗𝒆𝒏

P
P 105,000 𝑃 230,000 P 120,000 P 135,000 𝑃 255,000 𝑇𝑅 < 𝑇𝐶 𝑳𝒐𝒔𝒔
125,000

P 88,000 P 62,000 𝑃 150,000 P 50,000 P 61,000 𝑃 111,000 𝑇𝑅 > 𝑇𝐶 𝑷𝒓𝒐𝒇𝒊𝒕

Complete the table above.

 TOTAL TOTAL
R1 R2 VC FC REMARKS
REVENUE COST

P 195,000 P 155,000 350,000 P 170,000 P 190,000 360,000 TR<TC LOSS

P 175,000 P 185,000 360,000 P 124,000 P 187,000 311,000 TR>TC PROFIT

BREAK-
P 195,000 P 155,000 350,000 P 200,000 P 150,000 350,000 TR=TC
EVEN

P 178,000 P 124,000 302,000 P 176,000 P 142,000 318,000 TR<TC LOSS

P 199,000 P 100,000 299,000 P 190,000 P 150,000 340,000 TR<TC LOSS

Complete the table above.

Solving the
Break-Even
Point
Formulas:
TC = FC + VC
TR = TC “Break-Even”
R=p.X
P=R–C
Example 1
Calculate the break-even point in sales units and sales pesos from the
following information: P(x) = Vx + FC
Unit Price P20 Where P is the unit Price
x is the number of units
Variable Cost P8
v is the variable cost
Fixed Cost P12,000 FC is Total Fixed Cost

To solve for x: Formulas

P(x) = Vx + FC BEP in units = FC
Px-vx = FC P-v
x (P-V) = FC BEP in pesos = Unit Price x BEP in Units
x = FC
P-v
Example 1
Calculate the break-even point in sales units and sales pesos from the
following information: Given:
Unit Price P20
Variable Cost P8
FC = P 12,000
Fixed Cost P12,000 VC = P8 P = P20

BEP in units = 1,000 units BEP in Pesos = P20,000

BEP in units = FC
P-v BEP in Pesos = P20 x 1,000 units
= 12,000
20-8
= P20,000
= 12,000
12
= 1,000 units
Example 2
A company’s variable cost per unit is P7 and total fixed cost at
P9,000. If the company sold a total of 10,000 units yielding a total sales of
P150,000, find the BEP in units and BEP in pesos.
Given:
FC = P 9,000 VC = P7 P = P15

BEP in units = FC
P-v BEP in Pesos = P15 x 1,125 units
= 9,000
15-7
= P16,875
= 9,000
8
= 1,125 units
Example #3
The NYZ Sofa Company produces sofa chairs. The fixed cost of
production is P470,000 and the variable cost per sofa P6,200. The sofa
chair sells for P10,500 per piece. For a monthly sales volume of 140 sofa
chairs, determine the following:
Given:
FC = P 470,000 VC = P6,200 Price = P10,500

If NYZ company has a monthly sales volume of 140 sofa chairs. Determine the following: :
a) Total Cost
b) Total Revenue
c) Total Profit
d) How many sofa chairs must be sold in a month to break-even?
e) How much is the break-even sales?
Example #3
The NYZ Sofa Company produces sofa chairs. The fixed cost of
production is P470,000 and the variable cost per sofa P6,200. The sofa
chair sells for P10,500 per piece. For a monthly sales volume of 140 sofa
chairs, determine the following:
Given:
FC = P 470,000 VC = P6,200 Price = P10,500

Total Cost = ? Total Cost = P1,338,000

Solution:
a) TC = VC(x) + FC
TC = P6,200(140) + 470,000
TC = P868,000 + P470,000
TC = P1,338,000
Example #3
The NYZ Sofa Company produces sofa chairs. The fixed cost of
production is P470,000 and the variable cost per sofa P6,200. The sofa
chair sells for P10,500 per piece. For a monthly sales volume of 140 sofa
chairs, determine the following:
Given:
FC = P 470,000 VC = P6,200 Price = P10,500

Total Revenue = ? Total Revenue = P1,470,000

Solution:
b) R = p(x)
R = 10,500(140)
R = P1,470,000
Example #3
The NYZ Sofa Company produces sofa chairs. The fixed cost of
production is P470,000 and the variable cost per sofa P6,200. The sofa
chair sells for P10,500 per piece. For a monthly sales volume of 140 sofa
chairs, determine the following:
Given:
FC = P 470,000 VC = P6,200 Price = P10,500

Total Profit = ? Total Profit = P132,000

Solution:
c) P = TR - TC
P = P1,470,000 – P1,338,000
P = P132,000
Example #3
The NYZ Sofa Company produces sofa chairs. The fixed cost of
production is P470,000 and the variable cost per sofa P6,200. The sofa
chair sells for P10,500 per piece. For a monthly sales volume of 140 sofa
chairs, determine the following:
Given:
FC = P 470,000 VC = P6,200 Price = P10,500

BEP in units= ? BEP in units= 110 sofa chairs

Solution: Solution:
d) BEP = FC/ p - v d) R(x) = C(x)
BEP = 470,000/ (10,500-6200) 10,500(x) = 6,200(x) + 470,000
BEP= 110 sofa chairs 10,500(x)-6200(x) = 470,000
4300x = 470,000
x = 470,000/4300 = 110 sofa chairs
Example #3
The NYZ Sofa Company produces sofa chairs. The fixed cost of
production is P470,000 and the variable cost per sofa P6,200. The sofa
chair sells for P10,500 per piece. For a monthly sales volume of 140 sofa
chairs, determine the following:
Given:
FC = P 470,000 VC = P6,200 Price = P10,500

BEP in sales = ? BEP in sales= P1,155,000

Solution:
e) BEP in Sales = Price x BEP in units
BEP in Sales = P10,500 x 110 sofa chairs
BEP in Sales = 1,155,000
Example #4
Suppose a firm manufactures hand towels and sells them for P75
each. If the cost incurred in production and sale of the hand towels are
P200,000 plus P25 for each hand towels produced and sold.
a. Write the revenue, cost and profit function.
b. Find the Break-even point and break-even sales.

Solution: Given:
a) R(x) = 75(x)
C(x) = P25x + 200,000 FC = P 200,000
P(x) = 50x – 200,000
VC = P25 Price = P75
Example #4
Suppose a firm manufactures hand towels and sells them for P75
each. If the cost incurred in production and sale of the hand towels are
P200,000 plus P25 for each hand towels produced and sold.
a. Write the revenue, cost and profit function.
b. Find the Break-even point and break-even sales.

Solution:
b) BEP = 200,000/50 BEP in sales = P75 x 4,000
BEP = 4,000 BEP in sales = P300,000
Problem #1
Jaycris is planning to run a coffee shop where he plans to sell each cup
of coffee at P 50. He assumed that the fixed cost he needs to pay for the
monthly basis amounts to P 40,000 which includes all his expenses like the
amount he needs to pay for the rent, wages for his employees, his basic
expenses (electric bill, water bill, phone bill, and internet bill) and etc. So,
even Jaycris has no sales, he is still obliged to pay this amount.

Given:
If a cup of coffee costs Jaycris P 10 for the bulk of grind coffee beans,
FC = purified
P 40,000
water and coffee filters,
a) What is the break-even quantity? Break even point?
VC = 10x
b) Draw the break-even chart. TC = 40,000 + 10x
c) How much profit will he earn if he sells 500 cups? 1500 cups? R = 50x
d) How many cups must be sold to earn a profit of P 40,000?
 If a cup of coffee costs Jaycris P 10 for the bulk of grind coffee beans, purified water
and coffee filters,
a) What is the break-even quantity? Break even point?
b) Draw the break-even chart.
c) How much profit will he earn if he sells 500 cups? 1500 cups?
d) How many cups must be sold to earn a profit of P 40,000?

Given: FC = P 40,000 Solution: a) BEP = FC/ p - v

VC = 10x = 40,000/ (50-10)
TC = 40,000 + 10x = 40,000/40
R = 50x = 1,000

The break-even quantity is 1,000 cups of coffee. Jaycris will not incur any profit or loss.
at x = 1,000 R = 50x
= 50(1,000) Thus, the break-even point (BEP) is
= 50,000 (1000 , 50000)
 If a cup of coffee costs Jaycris P 10 for the bulk of grind coffee beans, purified water
and coffee filters,
a) What is the break-even quantity? Break even point?
b) Draw the break-even chart.
c) How much profit will he earn if he sells 500 cups? 1500 cups?
d) How many cups must be sold to earn a profit of P 40,000?

Given: FC = P 40,000 Solution: b) R = TC

VC = 10x 50x = 40,000 + 10x
TC = 40,000 + 10x 50x – 10x = 40,000
R = 50x 40x = 40,000
x = 1,000
The break-even quantity is 1,000 cups of coffee. Jaycris will not incur any profit or loss.
at x = 1,000 R = 50x
= 50(1,000) Thus, the break-even point (BEP) is
= 50,000 (1000 , 50000)
 a) What is the break-even quantity? BEP? (BEP) is (1000 , 50000)
b) Draw the break-even chart.
R= 50,000x
80,000
TC = 40000 + 10x

60,000
Revenue (y)

BEP = (1000, 50 000)

40,000

20,000

1,000 2,000 3,000 4,000 5,000

No. of cups of coffee (x)
 c) How much profit will he earn if he sells 500 cups? 1500 cups?
d) How many cups must be sold to earn a profit of P 40,000?

c) x = 500 ; x = 1500 d) P = 40, 000; x = ?

Profit? P = 40x – 40,000
P = R - TC 40,000 = 40x – 40,000
R = 50x 40,000 + 40,000 = 40x
TC = 40,000 + 10x
80,000 = 40x
P = 50x – (40,000 + 10x) 2,000 = x
P = 40x – 40,000
x = 2,000
at x = 500 at x = 1500
P = 40(500) – 40,000 P = 40(1500) – 40,000 Thus, Jaycris must sold
P = 20,000 – 40,000 P = 60,000 – 40,000 2,000 cups of coffee to
P = (20,000) Loss P = 20,000 earn 40,000.
Problem #2

A store owner sells 1 whole pad paper at P 10 per

pad. His fixed cost id P 5,000, and the variable cost is P 5
per pad.
a) At what level of production will the business owner
have a profit of P 2,000? A loss of P 1,000?
b) How many pad papers will he break-even?
c) Find the break-even point.
Given: FC = 5,000
VC = 5x at Loss = 1,000
TC = 5,000 + 5x P = -1000
R = 10x P = 5x – 5,000
a) P = 2,000 ; Loss = 1,000 At P = 2,000 -1,000 = 5x – 5,000
P = R - TC 2,000 = 5x – 5,000 -1,000 + 5,000 = 5x
P = 10x – (5,000 + 5x) 2,000 + 5,000 = 5x 4,000 = 5x
P = 5x – 5,000 7,000 = 5x
x = 800
x = 1,400
Given: FC = 5,000 VC = 5x TC = 5,000 + 5x R = 10x
b) TR = TC c) BEP = ( x , R)
10x = 5,000 + 5x R = 10x
10x – 5x = 5,000 R = 10(1,000)
5x = 5,000 R = 10,000
x = 1,000
Thus the break-even point
Break-even is at 1,000 pad (BEP) is at (1000, 10000).
papers.
Problem #3

KBS Manufacturing Company sells its product at P50. It has been recorded
that the variable cost is P25 and the fixed cost is P50,000.
1. Set up the revenue function. Given: FC = 50,000 R = 50x
2. Set up the Total Cost Function. VC = 25x
3. Set up the profit function.
4. How much is the profit if 800 units of its product were sold?
5. How many units will the company’s break-even?
6. Find the break-even in sales?
7. At what level of production will KBS manufacturing has a profit of P20,000?
8. At what level of production will KBS manufacturing has a loss of P10,000?
Thank you!
Ms. Karen B. Sumang
Subject Teacher