Break-Even Analysis refers to a financial tool that determines the point at which a new product, service or organization will be profitable. Break-Even Analysis helps to know about the number of units that must be sold to cover an organization’s variable and fixed costs of production. Concept of Break-Even Point The Concept of Break-Even Point refers to the point where both the revenue from sales and cost of production are equal to each other showing neither profit nor a loss Computation of Break-Even Sales Computation of Break-Even Sales refers to the formula for calculating Break-Even Sales. Simply divide the fixed costs of a firm by its contribution margin percentage. Graphical Representation of Break-Even The Graphical Representation of Break-Even is simply the Break-Even chart in graphical form. It represents costs at different levels of activity shown as the variation of income with the same variation in the activity. It also shows the sales units as well as the price required for the break-even. Variables Influencing Break-Even Point Change in Price Change in price that will impact overall sales revenue and later the break-even points Change in Fixed Cost Change in fixed costs as an increase will shift the break-even point upwards and a decrease downwards Change in Variable Cost per unit Changes in variable cost per unit as an increase in variable cost raises the break-even point and a decrease lowers it Business Application of Break-Even Analysis 1. Determine returns on Capital Employed (ROCE) 2. Variable and fixed cost recovery 3. Profit Forecast by setting profit targets 4. Effect of Changes 5. Determine sales and market strategy 6. Capacity utilization to improve the efficiency of employed resources 7. Raising capital for further expansion This video is on Break-Even Analysis and it has the following sub-topics. Time Stamps 0:00 Introduction 00:13 Even Point Concept of Break 01:18 Even Sales Computation of Break 01:48 Even Graphical Representation of Break 03:04 Even Point Variable Influencing Break 03:07 Change in Price 04:02 Change in Fixed Cost 05:05 Change in Variable Cost per unit 06:05 Even Analysis Business Application of Break