Break-Even Analysis Concepts
📌 The break-even point (BEP) is where revenue equals cost; the company makes neither a profit nor a loss.
📉 Profit is calculated as Revenue minus Total Cost. A positive result indicates a profit (gaining), while a negative result indicates a loss (losing).
💸 Total Cost is composed of Fixed Costs (costs paid regardless of production quantity, like rent) and Variable Costs (costs proportional to the quantity produced).

Break-Even Calculation Example 1 (Xerox/Photocopy Service)
💰 Fixed costs identified were 7,000 pesos (rent) + 5,000 pesos (salary), totaling 12,000 pesos.
📊 Variable cost was 0.55 pesos per page (0.50 for paper + 0.05 for electricity).
📈 To break even, the required selling price per page was calculated such that the contribution margin offsets the fixed cost, resulting in the BEP quantity being 21,818 pages.

Break-Even Calculation Example 2 (TV Sales)
💲 Fixed costs included rent (2,000), manager salary (1,000), and bills (700), totaling 3,700 pesos.
🛠️ Variable cost per unit was 1,300 pesos (purchase cost of 1,000 + 300 bonus per unit).
🎯 The BEP quantity was calculated to be 4.47 TV units (rounded up to 5 units) to ensure breaking even or making a small profit.

Profit Volume (PV) Ratio and Target Profit
🧪 The PV Ratio (Contribution Margin Ratio) is calculated as (Selling Price - Variable Cost) / Selling Price.
📈 For the TV example, the selling price was 2,500 and variable cost was 1,300, yielding a contribution margin of 1,200 and a PV ratio of 48%.
💰 To find the required sales revenue to achieve a target profit, the formula used was: (Fixed Cost + Target Profit) / PV Ratio.

Break-Even Calculation Example 3 (Halo Blogs Production)
🏗️ The company producing Halo Blogs had a fixed cost of 10,000 pesos weekly and a variable cost of 3 pesos per unit (raw materials, electricity, labor, transportation).
💵 To gain a profit equal to 50% of the total cost, the required selling price was found to be 9.75 pesos per unit.
🛑 The BEP quantity was found when setting profit to zero, resulting in a requirement of 3,334 units to break even.

Key Points & Insights
➡️ Understanding the components of Fixed Costs (independent of volume) and Variable Costs (dependent on volume) is fundamental to BEP analysis.
➡️ The break-even point acts as a critical threshold; operating below BEP results in a loss, while above BEP results in a profit.
➡️ In a profit scenario, using the PV Ratio helps determine the necessary sales revenue needed to cover fixed costs and reach a specific profit target.
➡️ Analyzing profitability at full capacity utilization (e.g., 80% efficiency) helps determine expected profit margins under operational constraints.

📸 Video summarized with SummaryTube.com on Nov 24, 2025, 08:43 UTC