BIT 2406 - Chapter 1: Break-Even Analysis
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11 Terms
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What is Break-Even Analysis?
the modeling technique where the # of units to sell or produce that will result in 0 profit
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Fixed cost (c_f)
costs independent of production volume (ex: rent)
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Variable cost (c_v)
cost per product unit produced
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Volume
number of units produced or sold
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Total variable costs =
v * c_v
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Total costs (TC) =
c_f + v * c_v
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Profit (Z) =
v * p - c_f - v * c_v
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Break-Even Formula
v_BE = c_f / p - c_v
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If price (p) increases…
BEP (break-even point) decreases (fewer units needed)
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If per-unit variable increases…
BEP increases (more units needed)
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If fixed costs increases…
BEP increases (more units needed)
Note 
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