Demonstrate the impact of changing cost and revenue data on the breakeven point of a selected business

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Demonstrate the impact of changing cost and revenue data on the breakeven point of a selected business

Breakeven analysis can also be used to show how risky a business might be if the revenues or costs are not as originally predicted. Mia has considered a range of alternative scenarios where the cost and revenue are different to her original figures.

Changes in fixed costs

 In the table above I can see the fixed costs have increased to 1,350. The fixed costs in the original sheet were 1,200. The differences between the two sums are £150. The Variable costs stay the same in the two sheets, but the total costs are different. In the original sheet the total cost of 2000 customers is £4200, but in this sheet the total is £4350. The revenue stays the same for both sheets but the last column (profit/loss) will change. On the original sheet the profit/ loss for 6000 customers is 7800, whereas this sheet is 7650.

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The break even formula is              

 

 Fixed cost                                                      

 --------------

(Selling price- Variable costs per unit)

1350

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£3.00 - £1.50 = £1.50

The breakeven point is £900

In the table above I can see the fixed cost have decreased to £1125 per month, in the original sheet it was £1200 pounds and has decreased by £75. The variable ...

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