BREAK EVEN ANALYSIS GRAPH WITH EXPLANATION

BREAK EVEN ANALYSIS GRAPH WITH EXPLANATION

1. BREAK EVEN ANALYSIS GRAPH

2. Step 1 Plot the quantity of shirts sold on the X axis. Plot the revenue and costs on the Y axis. Step 2 Draw the fixed cost line on the graph Step 3 Add the total cost line to the graph. Total costs are fixed costs plus variable costs. Step 4 Add the total revenue curve to the graph Step 5 Identify the break-even point (BEP) on the graph. The BEP is the level of output/sales when total revenue equals total cost.

3. MARGIN OF SAFETY Margin of safety represents the strength of the business. It enables a business to know what is the exact amount it has gained or lost and whether they are over or below the break even point. Margin of safety (in dollars) = Sales (Actual) – Sales (BE )

4. INTERPRETATION FROM GRAPH