I'm trying to create a Break Even Analysis for a non-profit gym. They
sell many "products" at tiered prices. I know the variable cost is $20
and the expense is 88000. The products have as little as one student
to as many as 250. The prices are just as varied from $50 to $1000.


How can I create a break even chart with this information? I
understand you may not be able to provide me with the chart but a
tutorial would be great. If they were a one product company I'd be
able to complete this on my own.

Thank you

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Request for Question Clarification by denco-ga on 28 Nov 2006 23:52 PST

Howdy blah3002-ga,

Without the actual numbers, it is difficult to give you anything other than a
general "quick and dirty" approach, but here goes.

Take a period of time, a year if you have those numbers, for instance, all of
2005.  If you don't have a year, use the longest the period of time that you
have on hand.

Take the number of students across that period of time and the net income from
that group.  Net income is the money received less the per student variable
expense.

Divide the net income by the number of students.  That gives you an average of
per student net income per the period of time used.

The fixed expense divided by the per student net income will give you the break
even number of students you need for the period of time used.

Here is an example of a one year estimation.

Across this one year example, let's say that $60,000 gross was brought in from
a total of 1,000 students with a variable annual cost of $20 a student.  The
fixed expense is $88,000.

So, we end up with $60,000 - $20,000 for $40,000 divided by 1,000 for a net
income per student of $40.  $88,000 divided by $40 gives us 2,200 students
needed to break even.

You can then divide that out, proportionally for seasonal flucuations, if
desired, across the year, say monthly or weekly, to set those kinds of goals.
In our example, the gym would need around 184 students a month or or 43
students a week for break even.

If you want, you can also do a breakdown of each "product" and calculate the
break even per "product."

In a past career, I had a company that had 5 tiers of clients and pricing and
just used the "averaging" process that I outlined above, and it worked out.

If you can provide more details, I can perhaps clarify the above.  Thanks!

Looking Forward, denco-ga - Google Answers Researcher

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Clarification of Question by blah3002-ga on 29 Nov 2006 22:10 PST

Thank you for you quick response.

It is good to know I was on the right track. 

I don't feel comfortable posting the data to this public site. Thank
you for your answer. That satisfies my request. Claim your prize!

Take care

Howdy blah3002-ga,

Much thanks for accepting this as your answer.

Without the actual numbers, it is difficult to give you anything other than a
general "quick and dirty" approach, but here goes.

Take a period of time, a year if you have those numbers, for instance, all of
2005.  If you don't have a year, use the longest the period of time that you
have on hand.

Take the number of students across that period of time and the net income from
that group.  Net income is the money received less the per student variable
expense.

Divide the net income by the number of students.  That gives you an average of
per student net income per the period of time used.

The fixed expense divided by the per student net income will give you the break
even number of students you need for the period of time used.

Here is an example of a one year estimation.

Across this one year example, let's say that $60,000 gross was brought in from
a total of 1,000 students with a variable annual cost of $20 a student.  The
fixed expense is $88,000.

So, we end up with $60,000 - $20,000 for $40,000 divided by 1,000 for a net
income per student of $40.  $88,000 divided by $40 gives us 2,200 students
needed to break even.

You can then divide that out, proportionally for seasonal flucuations, if
desired, across the year, say monthly or weekly, to set those kinds of goals.
In our example, the gym would need around 184 students a month or or 43
students a week for break even.

If you want, you can also do a breakdown of each "product" and calculate the
break even per "product."

In a past career, I had a company that had 5 tiers of clients and pricing and
just used the "averaging" process that I outlined above, and it worked out.

If you need any clarification, please feel free to ask.


Search strategy: Personal experience of doing such break even calculations.

Looking Forward, denco-ga - Google Answers Researcher

What I suggest is using a program that graphs like say the graphing
tool on a TI series calculator or Microsoft Excel or another program
you might be familiar with to create the chart. A breakeven chart
would need to include 2 lines one representing the sales and the other
the costs. The costs because of the fixed costs, in your case 88000
would start higher than the sales revenue which starts at 0. In other
words even if you do not have sales revenue you still have to pay that
88000 according to your information provided no matter what. As a
sidenote 88000 is relative on currency but 88000 sounds expensive as
fixed costs in dollars unless it is on a yearly basis you are
reffering to.
You would have to take into effect the various prices of the products
sold. I assume that you have prices for certain products. Say
weightlifting $50, martial arts $200, total aerobics workout $300 and
so on. The equation with explanation that you do would be 88000(fixed
costs)+$22timesX(total number of packages, or your variable cost per
gym package)-[Y times price 1 + z times price 2 + H times price 3 and
so on]=0. The graph of the first line would be 88000+$22 times X
the graph of the second one [Y times price 1 + z times price 2 + H
times price 3 and so on]. Where these two meet would be your breakeven
point.
It all depends on how much you know about the prices and numbers of
each package. You can put a lot or a little information on your graph
depending on project requirements.
Here are also some links to help you more.
First is a link to a breakeven calculator and an explicit method on
what breakeven means and a chart to how it is used.
http://home.ubalt.edu/ntsbarsh/Business-stat/otherapplets/BreakEven.htm
If you are more familiar with the concept then this provides a more
advanced chart and a more scholarly way to do breakeven analysis plus
more technical terms.
http://www.businesstools.org/breakeven/breakeven.html
Hope this helps.