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Project #1 - Break Even Analysis A simple break even analysis asks the question: How many...

Project #1 -

Break Even Analysis A simple break even analysis asks the question: How many books do you have to sell in order to make back your initial investment, otherwise known as breaking even. We make this calculation by looking at the total income, or gross sales, and equating it to the sum of the fixed costs, variable costs and profit from the items. Breaking even means that you go from negative profit to positive profit and the actual point where that transition occurs is when profit is equal to zero.

Gross Sales = Price per Unit * # of Units Sold

Fixed Costs do not change Variable

Costs = Cost per Unit * # of Units sold

1) Gross Sales = Fixed Costs + Variable Costs

2) P*X = FC + V*X + Profit; Profit = 0

3) P*X = FC + V*X

4) P*X – V*X = FC

5) X(P-V) = FC

6) X = FC/(P-V)

So the way to calculate the total number of units needed to break even, X, which is calculated by FC/(P-V). Please explain your logic/process, some of the calculations from excel and graphs if appropriate.

Math   Statistics-And-Probability   
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