Break even diagrams are fantastic for businesses. This is because it is able to give you a target to reach in order to start making money. This is able to motivate employees or business owners to see enough to maker money. To work out the break even point you would have to draw a graph however now due to research, there is a much quicker and faster way. You need the figures for fixed Cost/ (selling price-variable cost) = Break Even Point. A Break Even Point can be affected by total costs (if they are lower or higher) or the price as you would have to sell more if the price is lower or sell less if the price is higher.
Fixed Costs are expenses that do not change as a function of the activity of a business, within the relevant period. For example, a retailer must pay rent and utility bills irrespective of sales. Nothing interferes with the price.
Variable costs are costs that vary depending on a company's production volume. The costs rise as manufactuing increases and fall as manufacturing decreases. Variable costs differ from fixed costs such as rent, advertising, insurance and office supplies.
The total cost is the amount of money spent by a firm on producing a given level of output. Total costs are made up of fixed costs (represented as FC) and variable costs (represented as VC). This allows you to find a total cost which can show you how much you sold you products for overall.
The amount realized from selling goods or services within a period in a set period.
Break Even Today
Air Asia is a famous but new air line and it just shows how serious they are about breaking even. Recently the CEO of air asia has said "We are already cash flow positive. We are expecting to break even anywhere between May to June. AirAsia India will hit break even the moment we hit sixth plane" Overall, as they only have six planes, they are still doing very well and are looking to expand their business by purchasing more new planes. This is beneficial as it will allow more customers to flow in and receive the service. With more customers, out of them they could be able to get loyal customers as well as the word spreads about their service. It would either be good or bad depending on the customers opinion. If the word spreads out that it is good then they would be able to receive a positive brand image attracting even more customers however if it is bad, then they will b heading in the opposite direction.