Calculation and interpretation of break-even point; interpreting break-even charts; uses and limitations of break-even analysis
Break-even is the exact level of sales where a business covers all its costs and makes neither a profit nor a loss. You can calculate it, plot it on a chart, and judge how useful or misleading that information is.
Formula
Break-even (units) = Fixed costs ÷ Contribution per unit
Real World
When BrewDog opened its first bar, managers calculated that selling roughly 120 pints per day at £5 each would cover £18,000 monthly fixed costs — below that number the bar would make a loss.
Exam Focus
State the formula, show your working, then interpret the answer in context — all three steps earn separate marks.
Essay Framework
Use PEEL to structure every paragraph. Tap each step for guidance and an example.
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