Business Tools for Career Readiness

Finance for
Non-Financial Professionals
Module 2

with David Standen, D.B.A.

Break-Even Analysis
Using Direct Costs to Calculate Break-Even

Calculating Break-Even
Technique associated with a direct costing
approach

Calculating Break-Even
Technique associated with a direct costing
approach
Requires a company to classify costs as either:
o Fixed Costs - Costs uninfluenced by volume
of output and/or sales
o Variable Costs - Costs that vary directly with
volume of output and/or sales

Break-Even Example

Break-Even Example

Selling price = $10 per pizza

Cost of ingredients = $3.60 per pizza
Contribution = $6.40 per pizza

Break-Even Example
Price = $10
Variable Costs = $3.60
Contribution = $6.40
Fixed Costs = $4,000 / mo

$,
$.

= 625 pizzas sold

or $6,250

Break-Even Example
Price = $10
Variable Costs = $3.60
Contribution = $6.40
Fixed Costs = $4,000 / mo

$,
$.

= 625 pizzas sold

or $6,250

Standard Break-Even = 625 pizzas sold

Monetary Break-Even = $6,250

Break-Even Analysis