SENIOR HIGH SCHOOL

Business Mathematics
Quarter 1 Module 6
(Week 8)
The Break-Even Point

i
About the Module

This module was designed and written with you in mind. It is here to help you master
about The Break-even Point. The scope of this module permits it to be used in many
different learning situations. The language used recognizes the diverse vocabulary
levels of students. The lessons are arranged to follow the standard sequence of the
course. But the order in which you read them can be changed to correspond with
the textbook you are now using.
This module is divided into two lessons, namely:
Lesson 1 – The Break-even Analysis
Lesson 2 – Methods in Determining Break-Even Point

After going through this module, you are expected to:

• define break-even analysis; and
• solve problems involving break -even point in buying and selling products

ii
 What I Know (Pre-Test)

Instruction: Choose the letter of the correct answer. Write it on a separate

sheet of paper.

1.) Means of determining the break –even point

A. Break-even costs C. Break-even analysis
B. Break-even point D. Break-even calculation

2.) A cost that is independent of the volume of units produced.

A. fixed B. price C. revenue D. variable

3.) A cost that is determined on a per-unit basis

A. fixed B. price C. revenue D. variable

4.) Is the income obtained by producing or selling certain number of units?

A. fixed B. price C. revenue D. variable

5.) The difference between the selling price and the variable cost.
A. break-even analysis C. contribution margin
B. break –even point D. revenue

6.) Methods of Break-even Point

A. algebraic & graphical C. graphical, algebraic & using formula
B. graphical & using formula D. none of these

7.) The level of production by a company, which is expressed as the number of

units (quantity) produced and sold.
A. cost B. profit C. revenue D. volume

8.) The difference between total sales and total cost or the income generated by
the sale of a product.
A. cost B. profit C. revenue D. volume

9.) The usual number of different costs that must be taken into account in order
to determine profit.
A. cost B. profit C. revenue D. volume

For items No. 10 and 11, refer to the problem below:

Ronnie imports branded shirts from Los Angeles. He buys each shirt at
₱125.00 each and sells it at ₱ 220.00. He also spends a total of ₱133,000.00 for
the taxes, wages of distributors, rent of warehouse, distribution and freight costs,
etc. How many shirts should Ronnie sell to be able to break-even? Compute first
its contribution margin.

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10.) Contribution margin:
A. ₱85.00 B. ₱95.00 C. ₱105.00 D. ₱205.00

11.) BEP (break-even point)

A. ₱912.00 B. ₱1,095.00 C. ₱1,400.00 D. ₱1192.00

For items No. 12-15, refer to the problem below:

The following data were provided by Eve’s Halo-halo. The fixed cost of
the snack house amounted to ₱55,000.00 per month. Determine the daily
BEP in units and pesos for each item.

Monthly
Item Price Cost Forecasted
Sales (in Units)

Pizza ₱75.00 ₱50.00 1,000

Halo-halo ₱65.00 ₱45.00 1,200

Soft drink ₱15.00 ₱9.00 1,900

12.) BEP in pesos

A. ₱4,465.50 B. ₱5,325.75 C. ₱5,950.36 D. ₱6,902.61

13.) Pizza, BEP in units

A. 29 B. 38 C. 42 D. 50

14.) Halo-halo, BEP in units

A. 46 B. 50 C.62 D. 71

15.) Soft drink, BEP in units

A. 59 B. 67 C. 72 D. 85

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Lesson The Break-even Analysis
1

What I Need to Know

At the end of this lesson, you are expected to:
• describe break-even analysis; and
• define and determine break-even point

What’s In
Activity1.1
Instruction: Find and encircle 10 words from the cross word puzzle below
that are related to Break-even analysis. Words appear straight across,
back word straight across, up and down, down and up. (Note: Use the
attachment at the last page of this module.)

B R E A K E V E N A N A L Y S I S O G

T E A R D T F I X E D C O S T S F G H

T V N V A R I A B L E C O S T S V A J

I E T L M N O Q P R C B K L I O P N V

F N I G R A M N O I T U B I R T N O C

O U N I T S R C I F T S O C L A T O T

R E I G B R E A K E V E N G I O T E S

P A W Q T N I O P N E V E K A E R B F

What’s New

The Break-even Analysis

(Adapted from: Sirug, 2016)

Break-even analysis is the simplest quantitative model used by a

decision maker which is also referred to as cost-volume analysis. Its major
concerns are interrelationship of costs, volume and profit. It is the
determination of the number of units that must be produced and sold to
equate total sales with total cost.

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 Components of Break-even Analysis
• Volume – the level of production by a company, which is expressed
as the number of units (quantity) produced and sold.
• Profit – the difference between total sales and total cost or the
income generated by the sale of a product.
• Cost – the usual number of different costs that must be taken into
account in order to determine profit.
Fixed and Variable Costs
• Fixed Cost – It is a cost that is independent of the volume of units
produced. It will remain the same regardless of the volume of
sales. (e.g. rental, management salaries, some forms of
depreciation, property taxes, etc.)

Fixed Cost = Break-even Point x Contribution Margin

• Variable Cost – it is a cost that is determined on a per-unit basis.

It grows in direct proportion to the volume of sales. In other words,
the increase in the same amount for each additional unit falls into
this category. (e.g. material costs, direct labor costs in
manufacturing, utilities directly affecting production, etc.)

Variable Cost = Selling Price - Contribution Margin

Revenue and Contribution Margin

• Revenue is the income obtained by producing or selling a certain
number of units.
• The contribution margin is the difference between the selling
price and the variable cost. Keep in mind that there will be profit
only when total contribution margin exceeds total fixed cost.

Contribution Margin = Selling Price - Variable Cost

What Is It

Determining Break-even

You have learned difference between fixed cost and variable costs.
You also learned that markups or margins are just gross profits. These
margins, collectively, should cover first the fixed costs, the company loses
money. In this regard, a company must be able to sell the minimum
quantity of items to cover the total costs-both variable and fixed costs. This
point is called break- even (Santos and Sta. Maria, 2015).

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 Break-even point refers to the sales (in pesos or in units) where the
total revenue and total costs are equal, that is, there is neither profit nor
loss. Total revenue is obtained by multiplying the unit selling price by the
number of units sold, while total cost is calculated by adding the total fixed
costs and the total variable costs. The total variable cost is determined by
multiplying the unit variable cost by the number of units sold (Solano and
Alarcon, 2016).
In the previous example found in Module 7 (Profit and Loss), Andres
has to sell that 57 shirts to earn profit. If he sells fewer than 57, he would
incur a loss. What if he sells exactly 57 shirts? In this case, Andres neither
earns a profit nor incurs a loss. That is, his profit/loss is 0, and he is said
to be in breakeven.
A business is in if the total revenue generated is equal to the total
cost incurred. The number of items that needs to be sold to attain this is
called break-even even point.
Similarly, breakeven points could also refer to the amount of revenue
required to attain a profit/loss of 0. That is, instead of expressing it in terms
of number of sales, the breakeven point could be expressed in terms of its
monetary equivalent.

What’s More
Activity 1.2: NOW IT’S YOUR TURN!
A. Fill in the blanks. Fill each blank with the correct answers. Write your
answer on a separate sheet of paper.

1. _________ refers to the sales (in pesos or in units) where the total revenue
and total costs are equal.
2. A ________ will remain the same regardless of the volume of sales.
3. _______ is the income obtained by producing or selling a certain
number of units.
4. ________ grows in direct proportion to the volume of sales.
5. _________ is the determination of the number of units that must be
produced and sold to equate total sales with total cost.
6. ______ is the difference between total sales and total cost or the income
generated by the sale of a product.
7. _______ is the difference between the selling price and the variable cost.
8. _______ is the usual number of different costs that must be taken into
account in order to determine profit.
9. _______ is the level of production by a company, which is expressed as
the number of units produced and sold.

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B. Enumeration. List down the examples of fixed cost and variable cost.

Fixed Cost Variable Cost

10. ____________________________ 13. ___________________________
11. ____________________________ 14. ___________________________
12. ____________________________ 15. ___________________________

What I Need to Remember

When there is a profit

Revenue > Variable cost + Fixed cost

At break-even point

Revenue = Variable cost + Fixed cost

When there is a loss

Revenue < Variable cost + Fixed cost

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Lesson Methods in Determining Break-even
2 Point

What I Need to Know

At the end of this lesson, you are expected to:
• differentiate the method of determining Break-even Point; and
• solve problems involving buying and selling products using
different methods in determining break-even point

What’s In
Activity 2.1
Instruction: Complete the table below and solve for the unknown part.
Write your solution and answer on a separate sheet of paper.

Selling Variable Contribution Break-even

Fixed Cost
Price Cost Margin FC=BEP x CM
Point
SP=VC+CM CV=SP-CM CM=SP-VC BEP=FC/CM
A ₱ 25.00 ₱ 18.00 (1) ₱ 89,600.00 (2)
B ₱ 320.00 ₱185.00 (3) (4) 1,340
C (5) ₱ 29.75 (6) ₱ 156,510.00 8,460
D ₱ 550.00 ₱ 235.00 (7) ₱ 93,565.00 (8)
E ₱ 1,390.00 ₱ 995.00 (9) (10) 1,392

What’s New

Calculation of break-even point is

important for every business because
it tells business owners and
managers how much sales are
needed to cover all fixed as well as
variable expenses of the business or
the sales volume after which the
business will start generating profit.

Image 2: Break-Even Analysis

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 What Is It
Methods of Determining the Break-Even Point (BEP)
(Adapted from: Solano and Alarcon, 2016)

To determine the break-even point, you can use the graphical

method, algebraic approach, or using formulas.

Graphical Method

Pesos
Break-even point Sales

Total Cost

Fixed Cost

Units
Break-even chart

Follow these steps in using the graphical method to determine the break-
even point.
1. Sum up the fixed costs and draw the total as a horizontal line beginning
at the peso amount on the vertical axis. This is the total fixed cost line.
2. Draw the total cost line (sum of fixed and variable costs) starting at the
intersection of the vertical axis and the fixed cost as incrementally
increasing.
3. Plot also the sales (or revenue) beginning at the origin and show it also
as incrementally increasing.
4. Locate the intersection of the sales (or the revenue) line and the total
cost. The point of intersection is the break-even point.

Algebraic Approach

Total Revenue = Total Cost

Total Revenue = Units Sold x Selling Price per unit
Total Cost = Total Fixed Cost + Total Variable Cost
Total Variable Cost = Units Sold x Variable Cost per unit

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 Using Formulas

Break-even Point (BEP) in Units = Total Fixed Cost ÷ (Selling Price – Variable Cost)
Variable Cost
Break-even Point (BEP) in Pesos = Total Fixed Cost ÷ 1-
Selling Price

Example 1:

The cost of producing product A consists of ₱45.00 for labor, ₱54.00

for materials, and other variable cost of ₱1.00. Product A can be sold for
₱150.00 each. The total fixed cost is ₱150,000.00 per month. Determine how
many units of product A must be sold to break even. What is the BEP in
pesos of product A?

Solution:

a. Graphical Method

Assumed Sales/Revenue
Total Cost
Units (Selling Price x Units
(Total Fixed Cost + Total Variable Cost)
Sold Sold)
500 ₱150 x 500 = ₱75,000 ₱150 000 + (₱100 x 500) = ₱200,000

1000 ₱150 x 1000 = ₱150,000 ₱150 000 + (₱100 x 1000) = ₱250,000

3000 ₱150 x 3000 = ₱450,000 ₱150 000 + (₱100 x 3000) = ₱450,000

Total Revenue Line

Pesos
Break-even Point

450 000
Total Cost Line

250 000

150 000 Total Fixed

Cost Line
75 000

500 1000 1500 2000 2500 3000 Units

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b. Algebraic Approach
Explanation:
Let x = number of units of product A that must be sold to
break even. A variable x is
Total Revenue = Total Cost the letter whose
Unit Selling Price = Total Fixed Cost + Total Variable Cost value is
unknown. We
₱150.00x = ₱150,000.00 + (₱45.00 + ₱54.00 +₱1.00) x use x in solving
₱150.00x = ₱150,000.00 + ₱100.00x for the number
₱150.00x - ₱100.00x = ₱150,000.00 of units of
product A that
₱50.00x = ₱150,000.00
must be sold to
x = 3,000 units (BEP in units) break even.

BEP in pesos = ₱150.00 x 3,000

= ₱450,000.00

c. Using Formulas
BEP in Units = Total Fixed Cost ÷ (Selling Price – Total Variable Cost)
= ₱150,000 ÷ (₱150 - ₱100)
= 3,000 units

Variable Cost
BEP in Pesos = Total Fixed Cost ÷ (1 − )
Selling Price

₱100
= ₱150,000 ÷ 1-
₱150
= ₱450,000.00

Analysis: To avoid losses, the number of units for Product A that must
produce would not less than 3,000 units and must have a revenue of not
less ₱450,000.00.

Example 2:

The following data were provided by Yen’s snack house. The

fixed cost of the snack house amounted to ₱75,000.00 per month.
Determine the daily BEP in units and pesos for each item.

Monthly Forecasted
Item Price Cost
Sales (in Units)
Burger ₱25.00 ₱15.00 2,400
Fries ₱15.00 ₱7.00 1,200
Soft drink ₱12.00 ₱5.00 1,800

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Solution:

Weighted
Monthly
Selling Contribution
Price Variable Forecasted
VC Percent of
Item Cost Sales 1- VC
(SP) SP Sales SP x
(VC) (Sales in
(Percent of
Units x SP)
Sales)
Burger ₱25 ₱15 0.6 ₱60,000 0.602 0.241
Fries ₱15 ₱7 0.47 ₱18,000 0.181 0.096
Soft drink ₱12 ₱5 0.42 ₱21,600 0.217 0.126
Total ₱99,600 1.000 0.463

BEP IN Pesos = Fixed Cost ÷ Total Weighted Contribution

= ₱75,000 ÷ 0.463 = ₱161,987.04

This implies total daily BEP sales of

₱161,987.04 ÷ 24 days (4 weeks of 6 days/week) = ₱6,749.46

BEP in Units = (Percent of Sales x Break-even Point in Pesos) ÷ Selling Price

0.602 x 6,749.46
Burger, BEP in units = =162.53 ≈ 163
25
0.181 x 6,749.46
Fries, BEP in units = = 81.44 ≈ 81
15
0.217 x 6,749.46
Soft drink, BEP in units = = 122.05 ≈ 122
12

Analysis: For Yen to gain profit; she would need to have a revenue of not
less than ₱161,987.04 and must have to sell a unit at least 163- Burgers,
81-Fries and 122-Soft drink daily.

What’s More
Activity 2.2: NOW IT’S YOUR TURN!

Instruction: Solve the problem using the formula method of

determining break-even point (BEP). Show your solutions and answers
on a separate sheet of paper.

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 Therese owned a snack bar, her record shows the following
information:

Monthly Forecasted
Item Price Cost
Sales (in Unit)
Hotdog ₱20.00 ₱10.00 2,100

Cup cake ₱10.00 ₱6.00 1,300

Water
₱15.00 ₱9.00 1,500
(Distilled)

The fixed cost of the snack bar amounted to ₱69,000.00 per month.
Determine the daily BEP in units and pesos for each item.

What I Need to Remember

According to Solano and Alarcon (2016), it is important that you

know the break-even point of your business, which is the amount where
your total revenue is equal to your cost. In this way, you can think of
preventive measures to avoid incurring losses such as promotional activities
or marketing strategies to boost your sales or increase your market share.

What I Can Do

Apply It In Real Life

You are a newly hired manager of a retail business. The owner of the
retail business instructed you to present your break-even analysis for the
business. Your objective is to determine the break –even point in pesos and
in units for each item. (Note: You may choose any retail business in your
community.) The owner of the retail business will evaluate your break-even
analysis report based on content, organization and accuracy of
computations.
You can use any of the method (graphical method, algebraic approach and
using formulas).

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 RUBRIC OF BREAK-EVEN ANALYSIS REPORT
BELOW
SATISFACTORY EXEMPLARY
EXPECTATION
(3-4) (5)
(1-2)
The content is
CONTENT The content is The content is
generally
ANALYSIS inaccurate or complete and
accurate, but
overly general. accurate.
incomplete.
The presentation
The presentation is carefully
No apparent
has a focus organized and
organization.
ORGANIZATION and provides provides
Evidence is not
some evidence convincing
used to support
that supports evidence to
assertions.
conclusions. support
conclusions.
Representations
were essentially All visual 1. All aspects of
ACCURACY OF
correct but not representations the solution
COMPUTATION
accurately or were complete were complete
completely and accurate. and accurate.
labeled.

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 Assessment (Post Test)

Instruction: Choose the letter of the correct answer. Write it on a separate

sheet of paper.

1.) ________ is the simplest quantitative model used by a decision maker which
is
also referred to as cost-volume analysis.
A. Break-even Costs C. Break-even Analysis
B. Break-even Point D. Break-even Net Income

2.) _____ is the income obtained by producing or selling a certain number of

units.
A. Cost B. Expenses C. Price D. Revenue

3.) It is a cost that is independent of the volume of units produced.

A. expenses B. fixed cost C. net cost D. variable cost

4.) The ______ is the difference between the selling price and the variable cost.
A. break-even point C. fixed cost
B. contribution margin D. variable cost

5.) It is a cost that is determined on a per-unit basis.

A. break-even analysis C. fixed cost
B. expenses D. variable cost

6.) The level of production by a company, which is expressed as the number of

units (quantity) produced and sold.
A. cost B. profit C. revenue D. volume

7.) The amount of revenue required to attain a profit/loss of 0.

A. break-even analysis C. contribution margin
B. break-even point D. discount

8.) Methods of Break-even Point

A. algebraic & graphical
B. graphical & using formula
C. graphical, algebraic & using formula
D. none of these

9.) The difference between total sales and total cost or the income generated
by the sale of a product.
A. cost B. profit C. revenue D. volume

10.) The usual number of different costs that must be taken into account in
order to determine profit.
A. cost B. profit C. revenue D. volume

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 For items No. 11 and 15, refer to the problem below:

You are the owner of a snack bar at a movie house. Your record shows
the following information:
Monthly
Item Selling Price Variable Cost Forecasted
Sales (in Units)
Popcorn ₱99.00 ₱59.00 1,800
Hotdog Sandwich ₱49.00 ₱29.00 2,200
Donut ₱15.00 ₱8.00 2,500
Iced Tea ₱35.00 ₱25.00 1,500
Distilled Water ₱13.00 ₱9.50 2,800

The fixed cost of the snack house amounted to ₱130,000.00 per

month. Determine the daily BEP in units for each item.

11.) Popcorn, BEP in units

A. 24 B. 29 C. 33 D. 42

12.) Hotdog sandwich, BEP in units

A. 39 B. 45 C. 59 D. 65

13.) Donut, BEP in units

A. 190 B. 203 C. 210 D. 217

14.) Iced Tea, BEP in units

A. 48 B. 56 C. 63 D. 75

15.) Distilled water, BEP in units

A. 169 B. 178 C. 281 D. 293

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References

Text Books
Solano, I.P. and Alarcon, D.C. Business Math. Makati City, Philippines:
Diwa Learning Systems, Inc., 2016. pp. 91 – 98.

Sirug, W.S. Business Mathematics for Senior High School-ABM Specialized

Subject. Intramuros Corporate Plaza Bldg., Recoletos St., Intramuros,
Manila, Philippines: Mindshapers Co., Inc. 2016. pp 99-104.

Santos, D.C. and Sta. Maria, K.B.V. Business Math- Senior High School.
Makati City, Philippines: SalesianaBOOKS by DON BOSCO PRESS, INC.
2015. pp 97-103.

Websites

“Break-even Analysis” Break-even point Analysis: retrieved from

shorturl.at/biqKQ on August 17, 2020.

“Break-even Analysis” Operations: Introduction to Break-even Analysis:

retrieved from shorturl.at/iBDGY on August 18, 2020.

Images Sources
Image 1 source: istockphoto-897493012-170667astock-market-forex
trading-graph- graphic-concept (accessed June 15, 2020)

Image 2 source: shorturl.at/qMX34/Break-Even Analysis (accessed August

19, 2020)

Congratulations!
You are now ready for the next module. Always remember the following:

1. Make sure every answer sheet has your

▪ Name
▪ Grade and Section
▪ Title of the Activity or Activity No.
2. Follow the date of submission of answer sheets as agreed with your
teacher.
3. Keep the modules with you AND return them at the end of the school
year or whenever face-to-face interaction is permitted.

18
Activity1.1
Instruction: Find and encircle 10 words from the cross word puzzle below
that are related to Break-even analysis. Words appear straight across,
back word straight across, up and down, down and up.

B R E A K E V E N A N A L Y S I S O G

T E A R D T F I X E D C O S T S F G H

T V N V A R I A B L E C O S T S V A J

I E T L M N O Q P R C B K L I O P N V

F N I G R A M N O I T U B I R T N O C

O U N I T S R C I F T S O C L A T O T

R E I G B R E A K E V E N G I O T E S

P A W Q T N I O P N E V E K A E R B F

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