# Break Even

Break even analysis and its links to strategic aims and objectives

Terms of reference

I have been asked to produce a report on ‘break even analysis and its links to strategic aims and objectives’, for the team leader of the PLC Company Tesco. The report is to be submitted by approx 10th May 2007.

Procedure

In order to complete this assignment I am going to research on a product of the Tesco Company, to base my findings on. Also I am going to research on break even.

Definition of Break Even: Break even is when the point on the graph indicates when neither a profit nor a loss is made.

The figures I was given to work on are:

Materials= £7

Direct Labour= £3

Selling Price= £15

Fixed Costs= £18000

Now I am going to work out the variable costs, total cost, revenue and the profit and loss, using the figures above and the formulas.

Formulas

To find the variable cost:

Material + Direct Labour then answer x Units= Variable Cost

e.g.  7+3= 10x 1000=10000

To find the revenue:

No of Units x Selling Price= Revenue

E.g. 1000 x 15= 15000

To find the Profits/Loss:

Revenue -Total Cost= Profit/Loss

£15,000.00 - £28,000.00= -£13,000.00

To find the Total Cost:

Variable + Fixed Cost= Total Cost

£10,000.00 + £18,000.00= £28,000.00

To find Break Even Point:

Selling Price- Materials= Break Even Point

£15 – £7= £8

Total Fixed Cost

Selling Price - Materials

The three objectives I am going to choose that the company have, and use to see how break even helps to achieve the objectives are:

1) To make profit by selling goods to customers.

2) The purpose of the business is to sell a number of production units, to increase ...