Hello, future business tycoon! 🌟 Let's dive into the world of break-even revenue, an essential concept in Business Management. In this chapter, we will explore the break-even chart, break-even quantity, and break-even revenue calculations. Let's ride the learning bicycle 🚴 together and find out how many bicycles a company needs to sell to cover its costs. Let's go!

A break-even chart is a beautiful visual representation that shows the point at which total revenue equals total costs. In other words, it shows when a business starts to make a profit after covering both fixed and variable costs. In our example, the break-even chart (Figure 5.5.3) reveals that the break-even quantity is 50 bicycles, corresponding to a revenue of $6,000. Awesome, right?

Now, let's put our math hats on! 🎩🧮 We can calculate break-even revenue using the following formula:

Don't be scared! We've got a fun example for you

Imagine you own a fantastic bicycle company. 🚲 For each bicycle you sell at $120, it costs you $70 to make (variable costs). Your fixed costs (rent, electricity, salaries, etc.) are $2,500. To find out the break-even revenue, apply the formula:

• Contribution per unit = Price per unit - Variable costs = $120 - $70 = $50
• Break-even revenue = ($2,500 / $50) × $120 = $6,000

Yay! This calculation shows that your break-even revenue is $6,000. It means you need to sell bicycles worth $6,000 to cover your costs. Once you reach that magical number, every bicycle you sell afterward will be pure profit! 🎉💰