# The break even level of operation is represented by

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Chapter 1 / Exercise 18
Elementary and Intermediate Algebra
Tussy/Gustafson
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The break-even level of operation is represented by the point of intersection of two lines. The break-even level of production means the profit is zero.
Consider the following graph. The point (x o , y o ) is referred to as the break-even point. x o = break even quantity y o = break even revenue If x < x o then R(x) < C(x), therefore P(x) =R(x) –C(x) < 0 so you will have a loss. If x > x o then R(x) > C(x), therefore P(x) = R(x) – C(x) > 0 so you will have a profit.
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Chapter 1 / Exercise 18
Elementary and Intermediate Algebra
Tussy/Gustafson
Expert Verified
Math 1313 Section 1.5 4 Example 5: Find the break-even quantity and break-even revenue if C(x) = 110x + 40,000 and R(x) = 150x. Example 6: The XYZ Company has a fixed cost of 20,000, a production cost of \$12 for each unit produced and a selling price of \$20 for each unit produced. a. Find the break-even point for the firm. b. If the company produces and sells 2000 units, would they obtain a profit or loss? c. If the company produces and sells 3000 units, would they obtain a profit or loss?
Math 1313 Section 1.5 5 Example 7: Given the following profit function P(x) = 6x -12,000. a. How many units should be produced in order to realize a profit of \$9,000? b. What is the profit or loss if 1,000 units are produced? Example 8: A bicycle manufacturer experiences fixed monthly costs of \$124,992 and variable costs of \$52 per standard model bicycle produced. The bicycles sell for \$100 each. How many bicycles must he produce and sell each month to break even? What is his total revenue at the point where he breaks even?