Senior High School

Business
Mathematics
Quarter 1 – Module 8:
Break-Even Analysis

Writer:
IRISHGEL M. CABASISI
Teacher II – Caduang Tete National High School
(Macabebe)
Editors:
JANE P. VALENCIA, Ed.D. – EPS – Mathematics (CHAIRMAN)
CHARIZEL T. ARCILLA – SPST-I Malino National High School
JHOANNA S. MANALOTO – T-II San Juan High School (Mexico)
 What I Need to Know

This will give you an idea of the skills or competencies you are expected to learn
in the module.

After going through this module, you are expected to:

• define break-even;
• illustrate how to determine break-even point; and
• solve problems involving buying and selling products.

What I Know

This part includes an activity that aims to check what you already know about the lesson
to take. If you get all the answers correct (100%), you may decide to skip this module.

Direction: Choose the letter of the correct answer. Write the letter of your answer on a
separate sheet of paper. Show your solution.

1. What is the formula for Profit?

a. Income – Expenses c. Expenses – Income
b. Variable Cost – Fixed Cost d. Fixed Cost – Variable Cost

2. What is break-even point?

a. It happens when a business has no profit nor loss.
b. It happens when a business has no profit.
c. It happens when a business has no loss.
d. It happens when a businessman less the income from expenses.

3. Which of the following does not belong with the others?

a. Property Tax c. Rent
b. Salary d. Cost of raw materials

4. It refers to those expenses associated with running a business that can’t be linked to
creating or producing a product or service.
a. Overhead cost c. Fixed cost
b. Variable Cost d. Profit

5. What do you call the price of a single product or service?

a. Unit Price c. Variable Cost
b. Fixed Cost d. Profit

2
For numbers 6 – 7

Find the break-even point (BEP) given the following information:

Unit Price = ₱ 100
Variable Cost = ₱ 65
Fixed Cost = ₱10 000
No. of units to break-even: ________
Amount of BEP =

6. What is the number of units to break even?

a. 280 c. 286
b. 270 d. 285

7. What is the amount of units to break-even?

a. ₱28 600 c. ₱26 800
b. ₱28 600 d. ₱100

8. How much is the unit price?

a. ₱65 c. ₱10 000
b. ₱100 d. ₱28 600

9. How much is the variable cost?

a. ₱65 c. ₱10 000
b. ₱100 d. ₱28 600

10. How much is the fixed cost?

a. ₱65 c. ₱10 000

b. ₱100 d. ₱28 600

For numbers 11 – 15

Find the break-even point (BEP) given the following information:

Unit Price = ₱ 70
Variable Cost = ₱ 45
Fixed Cost = ₱1 000
No. of units to break-even: ________
Amount of BEP =

11. What is the number of units to break even?

a. 43 c. 41
b. 40 d. 42

12. What is the amount of units to break-even?

a. ₱2 800 c. ₱2 008
b. ₱28 60 d. ₱2 810

13. How much is the unit price?

a. ₱45 c. ₱70
b. ₱2 800 d. ₱1 000

14. How much is the variable cost?

a. ₱45 c. ₱70
b. ₱2 800 d. ₱1 000

15. How much is the fixed cost?

a. ₱45 c. ₱70
b. ₱2 800 d. ₱1 000

3
Lesson

1 Break-Even Analysis

Ideally, you should conduct an analysis before you start a business so you have
a good idea of the risk involved. In other words, you should figure out if the business
is worth it. Existing businesses should conduct this analysis before launching a new
product or service to determine whether or not the potential profit is worth the startup
costs. This lesson will help you understand more about break-even analysis.

What’s In

As a recall of our previous lesson about Interest, create a brainstorming web

about “PROFIT”. Write your answers on a separate sheet of paper or notebook.

PROFIT

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 What’s New

In order for a business to do well they need to be in control of their income and
their expenses.

Income – Expenses = Profit

Where the income graph is above the expenses, the area represents where the
business is making a profit.

What is It

Break-Even Point

Break-even point happens when business has no profit nor loss. In

case, the amount of expenses is equal to the amount of cost.
A break-even analysis is used to determine how much sales volume your
business needs to start making a profit.
A break-even analysis is especially useful when you’re developing a
pricing strategy, either as part of a marketing plan or a business plan.

The break-even point is the

point at which cost and
income are equal and there
is neither profit nor loss.

There are two basic types of costs a company incurs.

✓ Variable Costs
✓ Fixed Costs

5
 Variable costs are costs that change with changes in production levels or sales.

(Examples include: Cost of materials used in the production of the goods)

Fixed costs remain roughly the same regardless of sales/output levels.

(Examples include: Rent, Insurance and Wages)

Overhead costs
Overhead costs often referred to as overhead or operating expenses, it refers to
those expenses associated with running a business that can’t be linked to creating or
producing a product or service.

At break-even point:
Pn = cn + FC where, P = unit price
n = number of units
c = cost per unit
FC = fixed cost
To find the number of units to break-even:

Pn = cn + FC
Pn – cn = FC
n(P – c) = FC, hence,

Derived Formula:
𝐹𝐶 𝐹𝑖𝑥𝑒𝑑 𝑐𝑜𝑠𝑡𝑠
n= 𝐵𝑟𝑒𝑎𝑘 − 𝐸𝑣𝑒𝑛 𝑃𝑜𝑖𝑛𝑡 (𝑖𝑛 𝑢𝑛𝑖𝑡𝑠) =
𝑃−𝐶 𝑆𝑒𝑙𝑙𝑖𝑛𝑔 𝑝𝑟𝑖𝑐𝑒−𝑣𝑎𝑟𝑖𝑎𝑏𝑙𝑒 𝑐𝑜𝑠𝑡𝑠

Let’s take a look at this example for better understanding:

Example # 1
Find the break-even point (BEP) given the following information:
Unit Price = ₱50
Variable Cost = ₱14
Fixed Cost = ₱18 000
18 000
No. of units to break-even: n= 500
50−14

Amount of BEP = 500units x 50

= ₱25 000
Example # 2

Find the break-even point (BEP) given the following information:

Unit Price = ₱18
Variable Cost = ₱9
Fixed Cost = ₱8 200
8 200
No. of units to break-even: n= 911.11 ≈ 911
18−9

Amount of BEP = 911 units x 18

= ₱16 398

6
Break-Even Analysis Advantages

▪ The main advantage of a Break-Even Point is that it explains the relationship

between costs, production volume and revenue.
▪ It is helpful in sales price and quantity.
▪ It is helpful in examining effects upon organization’s profitability.

What’s More

Activity 1 Try this!

Read and analyze the following problems. Show your complete solution. Write
your answers on your notebook.

1. Jade has decided to set up a small business washing cars. He has

estimated that she will charge 315 per car he washes. However his cost
of sales will be 126 per car. He also have to pay 15,000 for rent each
month.
Calculate the break-even point (BEP):

2. It costs a publishing company Php350,000 to make books. The Php350,000 is a

fixed cost or a cost that cannot change. To help the publishing company sell the
books, a marketing company charges Php200 for each book sold. If the
company charges Php450 per book, how many books should they sell to break
even?
Calculate the break-even point (BEP):

3. It costs a man Php3,000 to buy the things that he needs to make hotdogs. The
city allows him to sell his hotdog somewhere near the city hall. However, the
city hall charges him Php4 for each hotdog sold.
Calculate the break-even point if the price he charges for 1 hotdog is Php30.
Calculate the break-even point (BEP):

4. Brian and Amy invest Php10,000 to start a hair cutting business. Each hair cut
costs them Php15 (supplies). They charge their customer Php70 for each cut.
How many hair cuts until they breakeven?
Calculate the break-even point (BEP):

5. At a dinner theatre the owner charges Php350 per ticket. She pays her
employees Php5,500. Each customer leaves with a free dessert that cost the
owner Php100 per dessert.
Calculate the break-even point (BEP):

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 What I Have Learned

Matching Type Test

Directions: Match Column A with the correct answer on Column B. Write only the
letter of your answer on your notebook.
Column A Column B

1. It is the point at which total A. Variable Costs

cost and total revenue are equal B. Break-Even
2. It is often referred to as operating C. Fixed Costs
expenses D. Unit Price
3. Rent, Insurance and Wages are E. Overhead Costs
𝐹𝐶
examples of this cost F. n= 𝑃−𝐶
𝐹𝐶
4. These are costs that change with E. n=
𝑐−𝑝
changes in production levels or sales.
5. The formula for BEP

What I Can Do

Solve the problem!

A printing company drew the following table to determine the costs to print
brochures. The company pays ₱10 to print only one brochure. The selling price is ₱20
each. The overhead costs is ₱1 000 per month.

Number of 0 50 100 150 200

Brochures

Overhead 1 000 1 000 1 000 1 000 1 000

costs

Printing 0 1 500 2 000

Costs
500 1 000

Total Costs 1 000 1 500 2 500 3 000

2 000

Income _______ 2 500 3 000 4 000

3 500

Answer the following questions:

1. How many brochures must the company sell to break even? ___________
2. What is the profit when it sells 200 brochures? ___________
3. Write the formula to determine income. _______________
4. Write a formula to determine the total cost. ________________
5. Solve the break-even point _____________________

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 Assessment

Direction: Choose the letter of the best answer. Write the chosen letter on a separate
sheet of paper.

1. What is break-even point?

a. It happens when a business has no profit or loss.
b. It happens when a business has no profit.
c. It happens when a business has no loss.
d. It happens when a businessman less the income from expenses.

2. What do you call the price of a single product or service?

a. Unit Price c. Variable Cost
b. Fixed Cost d. Profit

3. Which of the following does not belong with the others?

a. Property Tax c. Rent
b. Salary d. Cost of raw materials

4. It refers to those expenses associated with running a business that can’t be

linked to creating or producing a product or service.
a. Overhead cost c. Fixed cost
b. Variable Cost d. Profit

5. What is the formula for Profit?

a. Income – Expenses c. Expenses – Income
b. Variable Cost – Fixed Cost d. Fixed Cost – Variable Cost

For numbers 6 – 10, find the break-even point (BEP) given the following:

Unit Price = ₱ 100

Variable Cost = ₱ 65
Fixed Cost = ₱10 000
No. of units to break-even: ________
Amount of BEP = __________

6. How much is the unit price?

a. ₱65 c. ₱10 000
b. ₱100 d. ₱28 600

7. How much is the variable cost?

a. ₱65 c. ₱10 000
b. ₱100 d. ₱28 600

8. What is the amount of units to break-even?

a. ₱28 600 c. ₱26 800
b. ₱28 600 d. ₱100

9
 9. What is the number of units to break even?
a. 280 c. 286
b. 270 d. 285

10. How much is the fixed cost?

a. ₱65 c. ₱10 000
b. ₱100 d. ₱28 600

For numbers 11 – 15, find the break-even point (BEP) given the following:
Unit Price = ₱ 70
Variable Cost = ₱ 45
Fixed Cost = ₱1 000
No. of units to break-even: ________
Amount of BEP =

11. What is the amount of units to break-even?

a. ₱2 800 c. ₱2 008
b. ₱28 60 d. ₱2 810

12. What is the number of units to break even?

a. 43 c. 41
b. 40 d. 42

13. How much is the fixed cost?

a. ₱45 c. ₱70
b. ₱2 800 d. ₱1 000

14. How much is the variable cost?

a. ₱45 c. ₱70
b. ₱2 800 d. ₱1 000

15. How much is the unit price?

a. ₱45 c. ₱70
b. ₱2 800 d. ₱1 000

Additional Activities

For the final activity for this module, analyze and answer the given problems.
Write your answers on a separate sheet of paper or notebook. Show your solutions.
1. Pete is the managerial accountant in charge of Company X, which sells water
bottles. He previously determined that the fixed cost of Company X consist of property
taxes, lease, executive salaries, which add up to 100,000. The variable cost associated
with producing one water bottle is 2 per unit. The water bottle is sold at a premium
price of 12. Determine the break-even point (BEP) of Company X’s premium water
bottle.

2. Suppose you invest Php450,000 in equipment to manufacture a new board game.

Each game costs Php100 to manufacture and sells for Php250 How many board
games must you make and sell before your business breaks even?

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 11
Additional Assessment What I can do
Activities 1. A 1. 100
2. A 2. 1000
1. 10,000
3. D 3. Total cost +
2. 3000 board games 4. A overhead cost
5. A 4. Overhead cost +
6. B Printing cost
7. A 5. 2 000
8. A
9. C
10. C
11. A
12. B
13. D
14. A
15. C
What’s More What I have What I know
1. 79 learned 1. A
1. B 2. A
2. 1,400
2. E 3. D
3. 115 3. C 4. A
5. A
4. 182 4. A
6. C
5. F 7. A
5. 22
8. B
9. A
10.C
11.B
12.A
13.C
14.A
15.D
16.
Answer Key
 Development Team of the Module

Writer: IRISHGEL M. CABASISI – T-II Caduang Tete National High School (Macabebe)
Editor: JANE P. VALENCIA, Ed.D. – EPS – Mathematics
Reviewer: JANE P. VALENCIA, Ed.D. – EPS – Mathematics
CHARIZEL T. ARCILLA – SPST-I Malino National High School
JHOANNA S. MANALOTO – T-II San Juan High School (Mexico)
Illustrator: IRISHGEL M. CABASISI – T-II Caduang Tete National High School (Macabebe)
Layout Artist: IRISHGEL M. CABASISI – T-II Caduang Tete National High School (Macabebe)
Language Reviewer:

Management Team

ZENIA G. MOSTOLES, Ed.D., CESO V, Schools Division Superintendent

LEONARDO C. CANLAS, Ed.D., CESE. Asst. Schools Division Superintendent
ROWENA T. QUIAMBAO, CESE, Asst. Schools Division Superintendent
CELIA R. LACNALALE, Ph.D., CID Chief
JANE P. VALENCIA, Ed.D., Education Program Supervisor, Mathematics
JUNE E. CUNANAN, Education Program Supervisor/ Language Editor
RUBY M. JIMENEZ, Ph.D., Education Program Supervisor, LRMDS