Break-even

anaysis

Greetings

– Hello gr 11s

I hope you are well.

I hope you have copied all the pervious notes and have done the questions.

Answers will be posted soon.

Please do the same with these slides, copy everything and answer the questions.

Keep well

Ms Ngwenya

Introduction

– Break-even analysis

– used in business, in order to determine the exact point at which the business’

INCOME EQUALS the business’ EXPENSES.

– Enables businesses to optimise profits.

Income = Expenses

Terminology

– Income:

– Money that comes into the business.

– Expenses:

– Money that is spent on producing the product or rendering the service; as well as operational cost.

– Profit:

– The surplus/ extra money that is left over after all expenses have been paid ( income expenses)

– Loss:

– When there is not enough money to cover all the expenses( expenses income)

– Break-even:

– The point when income equals expenses, the business is neither making a profit or a loss

– ( income =expense)

Break-even graph

Notes on graph

1. Total income: Starts at the origin (0;0), no product is sold, not income.

2. Total expense:

– Starting point represents the fixed costs (Expenses of the company before

production).

– Constant increase indicates variable (changing) costs.

3. Break-even point: The point of intersection( where the graphs cross).

– Read using the x value (number of products needed)

4. Loss: Area between the graphs BEFORE break- even

– Expense line is above the income line

5. Profit: Area between the graphs AFTER break-even

Example 1

– An food fair is going to be held in Pretoria central. Sam decides sell tortillas at

R15 each. It costs him R5 to make a tortilla, plus R500 to rent a stall.

– Answer the questions that follow.

1. Provide a formula to represent Sam’s Total Income.

Dependent variable= 𝑐𝑜𝑛𝑠𝑡𝑎𝑛𝑡 ×independent variable

𝑇𝑜𝑡𝑎𝑙 𝑖𝑛𝑐𝑜𝑚𝑒 = 𝑅15 × 𝑛𝑜. 𝑜𝑓 𝑡𝑜𝑟𝑡𝑖𝑙𝑙𝑎𝑠

Continuation

2. Draw a table to represent Sam’s Total income, if he sells 0, 50, 100, 150, 200, 250

tortillas.

REMEMBER:

Solution:

INDEPENDENT VARIABLE (X) ALWAYS AT THE TOP

DEPENDENT VARIABLE (Y) ALWAYS AT THE BOTTOM

Make use of your formulato calculate the y values

No. of tortillas 0 50 100 150 200 250 300

Total income (R) 0 750 1500 2250 3000 3750 ?

𝑡𝑜𝑡𝑎𝑙 𝑖𝑛𝑐𝑜𝑚𝑒 = 𝑅15 × 𝑛𝑜. 𝑜𝑓 𝑡𝑜𝑟𝑡𝑖𝑙𝑙𝑎𝑠= 𝑅15 × 100= 𝑅1500

Continuation

3. Provide a formula to represent Sam’s Total Expenses.

Dependent variable= 𝑓𝑖𝑥𝑒𝑑 𝑐𝑜𝑠𝑡 + 𝑅5 × 𝑖𝑛𝑑𝑒𝑝𝑒𝑛𝑑𝑒𝑛𝑡 𝑣𝑎𝑟𝑖𝑎𝑏𝑙𝑒

𝑇𝑜𝑡𝑎𝑙 𝑖𝑛𝑐𝑜𝑚𝑒 = 𝑅500 + (𝑅5 × 𝑛𝑜. 𝑜𝑓 𝑡𝑜𝑟𝑡𝑖𝑙𝑙𝑎𝑠)

4. Draw a table to represent Sam’s Total expense, if he sells 0, 50, 100, 150, 200,

250 tortillas.

No. of tortillas 0 50 100 150 200 250

Total expense (R) 500 750 1000 1250 1500 1750

𝑇𝑜𝑡𝑎𝑙 𝑖𝑛𝑐𝑜𝑚 = 𝑅500 + (𝑅5 × 𝑛𝑜. 𝑜𝑓 𝑡𝑜𝑟𝑡𝑖𝑙𝑙𝑎𝑠)= 𝑅500 + 𝑅5 × 50= 𝑅500 + 𝑅250=750

BODMAS!!

GRAPH (continuation of example)

Work! :)

GRAPH Copy and answer the following questions in your book.

1. Label lines A and B with either billing or prepaid electricity cost and provide a reason.

2. If 4 500 kWh of electricity was consumed on the billing system, who much would Mphoneed to pay?

3. If Mpho received a bill for R2 400,00 on a prepaid system, how much electricity was consumed that month?

4. Approximately bow much electricity must Mpho consume to receive a bill that is the same for either payment options? How much will the bill be?

5. which payment system would you recommend Mpho should use if he uses 1 500 kWh of electricity?