Allocating Resources: Analysis (cont’d)

• Breakeven Analysis
– Is used to determine the point at which all fixed costs
have been recovered and profitability begins.
• Fixed cost (FC)
• Variable costs (VC)
• Total Fixed Costs (TFC)
• Price (P)

• The Break-even Formula:

Total Fixed Costs
Breakeven:
Unit Price - Unit Variable Costs

© 2007 Prentice Hall, Inc. All

9–1
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 Exhibit 9–10 Breakeven Analysis

© 2007 Prentice Hall, Inc. All

9–2
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