Marketing II: Zuby Singh on Break Even Analysis

TiE Young Entrepreneurs (TYE) A TiE-Boston Chapter Initiative MARKETING PART II | 31 January 2009 SESSION 3: What is an Break-even Analysis

Recap of what you have learnt… ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

What is Break-even Analysis? ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Why Break-even Analysis ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Understand this, makes you more competitive in the market place

Example: Basic Calculations Sum Calculation Price Item Description $26 - $6 $50 - $24 $100 - 50 $50 + $0 25 * $2 $4 * 25 $20 Net Profit [Pre-Tax Net Profit – Tax] $6 ,[object Object],$26 Pre-Tax Net Profit [Gross Profit – Total Fixed Cost] $24 ,[object Object],$50 Gross Profit [Revenue – Total Variable Cost] $50 ,[object Object],$0 ,[object Object],$50 ,[object Object],$100 Revenue [Unit Sale Price * Units Sold] 25 Total Units Sold $4 Sale Price of unit $2 Cost of Each unit

Specifics: Break-even Units $20 $26 - $6 Net Profit [Pre-Tax Net Profit – Tax] $6 ,[object Object],$24 ,[object Object],$26 $50 - $24 Pre-Tax Net Profit [Gross Profit – Total Fixed Cost] $50 + $0 $50 ,[object Object],25 * $2 $50 ,[object Object],$0 ,[object Object],Sum Calculation Price Item Description $24/$2 $50/25 $100 * $50 $4 * 25 $12 Break-even Units = Fixed Operating Cost/Gross Profit Per Unit $2 Gross Profit Per Unit = Total Gross Profits/Units Sold $50 Gross Profit [Revenue – Total Variable Cost] $100 Revenue [Unit Sale Price * Units Sold] 25 Total Units Sold $4 Sale Price of unit $2 Cost of Each unit

Change in Units Sold $12 $24/$2 Break-even Units = Fixed Operating Cost/Gross Profit Per Unit $0 $0 - $0 Net Profit [Pre-Tax Net Profit – Tax] $0 ,[object Object],$0 $24 - $24 Pre-Tax Net Profit [Gross Profit – Total Fixed Cost] $24 ,[object Object],$24 + $0 $24 ,[object Object],$0 ,[object Object],12 * $2 $24 ,[object Object],Sum Calculation Price Item Description $24/12 $48 - $24 $4 * 12 $2 Gross Profit Per Unit = Total Gross Profits/Units Sold $24 Gross Profit [Revenue – Total Variable Cost] $48 Revenue [Unit Sale Price * Units Sold] 12 Total Units Sold $4 Sale Price of unit $2 Cost of Each unit

At break-even point ,[object Object],[object Object],[object Object]

Note: Costs ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Element of dependency – normal costs Remains, no dependency

Total Costs Fixed Costs Variable Costs Total Costs Of Production Total Revenue & Cost Total Variable Costs Total Fixed Costs Loss Profit Break even Point Revenue UNITS $ More Higher

Note on Break-even ,[object Object],[object Object]

In a nut shell… ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Example 2: Calculation ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Marketing II: Zuby Singh on Break Even Analysis

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Marketing II: Zuby Singh on Break Even Analysis