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Break Even Analysis
Break Even Analysis
Break – Even Point is the point where the total revenue line and the total cost line intersect.
Symbols Used:
SP Selling Price BEQ Break – Even Quantity
TR Total Revenue BEP Break – Even Point
TC Total Cost BEP (BEQ, BER)
VC Variable Cost BER Break – Even Revenue
FC Fixed Cost
Formulas Used
TR = SP ×no . of units TC = FC + VC P = TR − TC
Example: ABC Co. sells its product at P16 per unit. The variable cost is P6 and the fixed cost is P2000. Find
each of the following:
Example: A certain company sells its product at P20. The selling price is decreased by 10% after learning
that the sale of product has begun to decline. Variable cost is P9 and the fixed cost is P1,000.
If the non-linear function is given, we can find its maximum or minimum point by using its derivates.
Rules of Derivates
3. Multiple Rule
d
If u is any differentiable function of x and c is any constant, then ( cu ) = c du
dx dx
3. Substitute this value of x in the original function and solve for y. These values of x and y are the coordinates
in the maxima or minima.
4. Test whether the point is maxima or minima by finding the second derivative y”. If y” is negative, the point
is maxima, if it is positive, the point is minima.
Example 1: Locate and classify the critical point of y = −3 x 2 +30 x −5
Example 2: Locate and classify the critical point of y = 2 x 3 − 6 x 2 −18 x + 20
Example 1: The profit function of a certain store is P = −4 x 2 + 32 x − 8 where P represents the profit, while x is
the number of units to sell. Find the maximum profit.
Example 2: A business firm estimated that its equation for cost is represented by the function
C = .16 x 2 − 20 x + 675 where C is the cost and x is the number of units to produce.
Example 3: A company sells its particular product at (16 – 0.02x) pesos. The variable cost is P8 and the fixed
cost is P600.