Interactive Management Science

Break-Even Analysis Break-even Analysis is an important type of cost-volume analysis, which focuses on relationships between cost, revenue, and volume of output. One purpose of this analysis is to estimate the income of an organization under different operating conditions. It is particularly useful as a tool for comparing capacity alternatives. This module allows users to both drag the lines and enter any quantity number they want to change revenue and cost formulas. They also can observe the revenue and cost value at any quantity within the visible axis range. You may need to install the latest Java Runtime Environment to run this module.

Instructions and Definitions: 1. Use the mouse to drag on the "TR", "TC", or "FC" label handler to adjust the TR, TC, or FC curves. 2. Use the mouse to drag on the "Q'" label handler to view the values of "TR","TC" and "FC" at the selected position. 3. The Color Pink is "Loss", the Color Cyan is "Profit". 4. TR = Total revenue: Total revenue increases linearly with the output. 5. TC = Total cost: Total cost is eaqual to the sum of the fixed cost and the variable cost per unit times volume. 6. FC = Fixed cost. 7. BEP = Breakeven point: The volume of output at which total cost and total revenue are equal.