How to build a break-even chart

Video: Constructing a Break Even Chart 2024, July

In economic theory and practice, the term break-even chart is often used. It demonstrates the income from production and sales, which covers all costs. This schedule can be calculated when the costs are constant.

Instruction manual

The first break-even schedule was set out in 1930 by Walter Rautenstrauch. This type of planning is called the critical production schedule (break-even chart). In economic theory, the costs (expenses) of production are constant and variable. To construct a breakeven chart, only fixed costs are taken. First, two coordinate axes are displayed. Costs are displayed along the X axis, and production is superimposed along the Y axis. In classical economic theory, with an increase in the quantity of production in an enterprise, the amount of costs increases proportionally.

When constructing the schedule, prices for materials and products as a whole are unchanged for a certain period. Sales occur evenly according to plan. When the volume of production and sales changes, variable costs do not change. In order to build a breakeven chart, you need to draw three lines on the chart. Fixed costs (POI) are applied parallel to the axis of the volume of production. The line of gross costs (VI) is growing taking into account variable costs. Gross costs (VI) is the sum of fixed and variable costs. The next line is sales revenue (BP).

When intersecting revenue from sales and gross (total) costs, a breakeven point (K) appears. The breakeven point shows the company zero profit at no cost. The correct break-even schedule will allow the company to correlate all costs and income from product sales. Using the breakeven chart, you can calculate the accurate forecast of enterprises and its main indicators.