Break Even Chart - Model 2

A concise bullet-point explanation of the Break Even Chart Model -2.

• On the vertical axis - Total revenues and total costs are measured, with unit sales measured.
• On the horizontal axis - Separate lines are drawn for total variable costs, total costs, and total revenues.
• The variable cost line is plotted first and then fixed cost line over the variable cost line.
• The latter line is the total cost line because it is drawn over the variable cost line and represents the total cost (variable and fixed) at various levels of output.
• The vertical distance between the total revenue and the total cost lines depicts the amount of profit or loss at a given volume.
• Losses occur when total revenues are less than total costs. Profits occur when total revenues exceed total costs.