Sample Thesis Paper
Break even analysis is done to determine the quantities which a firm should produce in order to break even, that is neither make neither profits nor losses. The number of the products produced should be able to cater for both the fixed costs and variable costs and leave the firm without any profits. This is usually the starting point for most of the firms as they enter the market for they have to win market share by maintaining their costs at the lowest levels possible. The major formula to use for the computation of break-even figures is;
Break even = fixed costs/ (per unit revenue- per unit variable cost).
All the costs are in millions
|Fixed cost (millions)||Per unit revenue||Per unit variable cost||Revenue-variable cost||Break even|
|$5,000||737- $70||$35||$35||143 million|
|$5,000||787- $190||$100||$90||56 million|
The break even figures work by assuming that the company is only producing one of the products and thus has to produce the quantities which will enable it make neither losses nor profits. All this assumptions are maintained with the assumption that all the other factors are held constant. By producing only 737 brand, the company should only produce 143 million pieces to cover all its costs and make no losses or profits. By producing the 787 brand on the other hand, the company should produce 56 million pieces to cater for all its costs.