ECONOMICS

Detailed explanation-1: -Since total costs include both fixed and variable costs, the line will start at the intersection point of the cost axis and the line indicating fixed costs, and will gradually increase.

Detailed explanation-2: -Creating a break even graph You plot a straight horizontal line of fixed costs across the graph, as these don’t change with the number of units produced. Then you plot a line for variable costs, starting at the point fixed costs start. This line represents total costs.

Detailed explanation-3: -A break-even graph shows a break-even point (BEP) visually. A break-even graph shows the revenue, costs, number of products sold and BEP.

Detailed explanation-4: -– Total Costs (TC). The Total Costs (TC) line is drawn and labelled. Recall that even when there is no Output, Fixed Costs (FC) still have to be paid. Hence, the Total Costs (TC) line starts at the same level as Fixed Costs (FC).

Detailed explanation-5: -To calculate the break-even point in units use the formula: Break-Even point (units) = Fixed Costs ÷ (Sales price per unit – Variable costs per unit) or in sales dollars using the formula: Break-Even point (sales dollars) = Fixed Costs ÷ Contribution Margin. Here’s What We’ll Cover: What Is the Break-Even Point?