An effective way to find the break-even point is to prepare a break-even graph. Because thios graph also shows cost, volume, and profits, it referred to as a cost-volume-profit graph. The construction of the graph is as follows:

  1. Plot the total-sales line, starting at the zero activity level.
  2. Plot the total fixed cost using a horizontal line, the fixed cost is the same at every level of   activity.
  3. Plot the total cost line. This starts at the fixed-cost line at zero activity. It increases by the variable   cost at each level of activity. On the graph, the amount of the variable cost can be derived from the differene   between the   total cost and fixed cost lines at each level of activity.
  4. Determine the break-even point from the intersection of the total cost line and the total revenue   line.