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Finance · StudentHub Lesson

Profit and break-even

Revenue, costs, profit and finding the break-even point.

20 minIntermediate
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01

What you will learn

  • Calculate revenue
  • Distinguish fixed and variable costs
  • Calculate profit
  • Find the break-even point
  • Use break-even to make decisions
02

Watch the lesson

We haven’t confirmed a lesson video that matches this topic closely enough yet, so the notes below are the lesson for now. A recommended video will be added once we’ve checked one properly.

03

Topic notes

Main Idea

Profit is what remains when total costs are subtracted from revenue. The break-even point is the output where revenue exactly equals total costs.

Key Concepts

  • Revenue = price × quantity sold
  • Fixed costs stay the same regardless of output (e.g. rent)
  • Variable costs change with output (e.g. materials)
  • Profit = revenue − total costs
  • Break-even = fixed costs ÷ (price − variable cost per unit)

Definitions

  • Fixed costs: Costs that do not change with output.
  • Variable costs: Costs that rise as output rises.
  • Contribution: Price minus variable cost per unit.
  • Break-even point: Output where total revenue equals total costs.

Worked Example

Fixed costs are ₹6,000, price is ₹50 and variable cost is ₹20 per unit. Find break-even.

  1. Contribution per unit = 50 − 20 = 30
  2. Break-even = 6000 ÷ 30
  3. Calculate

Answer: 200 units

Common Mistakes

  • Using price instead of contribution in the break-even formula
  • Classifying rent as a variable cost
  • Confusing revenue with profit
04

Key concepts

Revenue = price × quantity soldFixed costs stay the same regardless of output (e.g. rent)Variable costs change with output (e.g. materials)Profit = revenue − total costsBreak-even = fixed costs ÷ (price − variable cost per unit)
05

Important terms

Fixed costs
Costs that do not change with output.
Variable costs
Costs that rise as output rises.
Contribution
Price minus variable cost per unit.
Break-even point
Output where total revenue equals total costs.
06

Worked examples

Problem

Fixed costs are ₹6,000, price is ₹50 and variable cost is ₹20 per unit. Find break-even.

  1. 1. Contribution per unit = 50 − 20 = 30
  2. 2. Break-even = 6000 ÷ 30
  3. 3. Calculate

Answer: 200 units

07

Quick revision

  • Revenue = P × Q
  • Fixed vs variable costs
  • Profit = revenue − costs
  • Contribution = price − variable cost
  • Break-even = fixed ÷ contribution
08

Check your understanding

Question 1 · Multiple choice

Which is a fixed cost?

Question 2 · Short answer

Revenue ₹10,000, total costs ₹7,500. What is the profit?

Question 3 · True or false

At the break-even point, the business makes a profit.

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