Break Even Chart - Model 3

A concise bullet-point explanation of the Break Even Chart Model -3.

• The fixed cost line is drawn parallel to the X axis.
• The contribution line is drawn from the origin and this line goes up with the increase in output.
• The sales line is plotted as usual.
• The question of interaction of sales line with cost line does not arise because the total cost line is not drawn in this method.
• Here, break-even point is that point where the contribution line cuts the fixed cost line. At this point, contribution is equal to fixed expenses and there is neither profit nor loss.
• If the contribution is more than the fixed expenses, profit shall arise and if it is less than the fixed expenses, loss shall arise.