Rearranging the Break Even Formula

Which of these is the correct break even formula?

(/ = divide)

• fixed costs / (variable cost of one unit - price of one unit)

• fixed costs / (price of one unit - variable cost of one unit)

• (price of one unit - variable cost of one unit) / fixed costs

• fixed costs x (price of one unit + variable cost of one unit)

Why might we rearrange the break-even formula?

• To prove we can do Maths

• To show off

• To find finance information that we don't know

• To help understand Business Studies

What does the break even point show?

• where a business is neither making a profit or loss
• how many items to make
• how much profit they're making
• where a business has more fixed costs than variable

One of the main purposes for calculating break-even is to help the business to

• determine stock value
• prepare an income statement
• forecast sales
• set selling prices

Olivia wants to rearrange the break-even formula to work out the fixed costs for a business. Fill in the missing mathematical operator:

fixed costs = break-even point ? (price per unit - variable cost per unit)

• +

• -

• / (divide)

• x

fixed costs = break-even point x (selling price per unit - variable costs per unit)

Work out the fixed costs for Olivia if the break even point is 250, the selling price is £5.90 and the variable cost is £1.90. Use the correct currency unit.

Timer is set to two minutes so don't rush!

Answer explanation

FC = 250 x (5.90 - 1.90)

= 250 x 4

= £1000 (don't forget the £ sign!)

Ben wants to rearrange the break-even formula to work out what a business charged as the selling price. Fill in the blank.

Selling price per unit = (fixed costs / ______) + variable cost per unit

• revenue

• break-even point

• total variable costs

• profit

selling price per unit = (fixed costs / break-even point) + variable cost per unit.

Ben knows that the fixed costs are £5000, the break even point is 125, and the variable cost is £6.50. Work out the selling price per unit.

(Again, timer is set to two minutes...)

Lily wants to rearrange the break-even formula to work out the variable cost per unit. What is the correct order of the blanks?

variable cost per unit = ______ - (______ / ______)

• selling price per unit, fixed costs, break-even point

• selling price per unit, break-even point, fixed costs

• fixed costs, selling price per unit, break-even point

• break-even point, fixed costs, selling price per unit

Help Lily work out the variable cost of one unit. Fixed costs = £10000, break-even point = 250, selling price of unit = £49.50.

Variable cost per unit = selling price - (fixed costs / break-even point)