Let’s take an elementary example: a business plans to sell only one product and has only one fixed cost, the rent.
In Figure 20.1 the vertical axis shows the value of sales and costs in thousands of pounds, and the horizontal axis the number of ‘units’ sold. The second horizontal line represents the fixed costs, those that do not change as volume increases. In this case it is the rent of £/$/€10,000. The angled line running from the top of the fixed costs line is the variable costs. In this example the business plans to buy in at £/$/€3 per unit, so every unit it sells adds that much to its fixed costs.
FIGURE20.1 Graph showing break-even point
Figure 20.1 details
The ...
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