Examples - break-even analysis (1)
Now you can get down to some practice and make sure that you know, understand and can do break-even questions. There is a strong chance that you will be faced with one in your Business and Management examination.
You are now given cost and revenue information corresponding to a particular level of sales and production. Again, the key is to decide which costs are fixed and which are variable.
Garden Furniture plc
The Finance Manager for Garden Furniture plc has presented the Directors with the following data relating to the manufacturer of garden tables:
At the present sales and production level of 10,000 tables per quarter,
The firm has the following financial data for the previous quarter:
- Sales revenue of $1,000,000
- materials costs of $200,000
- labour costs of $100,000
- variable overheads of $100,000 and
- fixed costs of $300,000.
Task 1: Draw the break-even chart for the present operation. Fully label your diagram.
Task 2: Determine how much profit the firm would make if sales fell by 10%
When you have calculated the answer and drawn the break-even chart, follow the links below to see the calculations and the correct break-even chart. If you run into difficulties, have a look at the calculations and then try to draw the chart from them.