The break-even chart is a chart used to give information about the viability of an enterprise and effective in warning of approaching disaster. In its simplest form the figures charted are those of total costs and total revenue. When these totals are equal, a break-even point has been reached, i.e. the business is netiher making money or losing it.
More elaborate charts will differensiate between various categories of costs, e.g. fixed costs and variable costs. The difference between revenue and variable costs will represent gross profit and, other things being equal, will rise with output. The point at which this difference equals fixed costs will be the break-even point. This can be illustrated on a graph where the x axis denotes the level of output, revenue is shown as a curve beginning where the two axis intersect and variable costs as another curve commencing at a point on the y axis, y = C, where C represents fixed costs. The point of intersection of the two curves is the break-even point. More sophisticated graps can be drawn to illustrate the rate of incease in profits with rising output, both before and after the break-even point i reached.
Reference: The Penguin Business Dictionary, 3rd edt.
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