Joe is a voluntary club administrator and he has the responsibility to organise a sporting event.

This event requires the expenditure of the following amounts:

These amounts will be spent no matter how many people turn up to the event, and therefore they are called Fixed Costs.

At event, however, there will be other costs which will be dependant upon the number of people who turn up and participate. These costs are as follows:

These costs are referred to as variable costs because the amount of cost will vary with the number of competitors.

Joe is worried about how many competitors he needs to break-even if he charges a competition entry price of $20.00 per participant. He wants to calculate the minimum number of participants he needs so that the event does not lose money.

The term break-even means that all event costs will just be covered by all event income.

This problem is an every-day problem for businesses of all types but fortunately it is not a difficult one.

In solving this type of problem it is necessary to distinguish between fixed and variable costs (as above). This is how Joe calculates the solution:

The answer is 200 competitors!

The above a solution is a commonsense way of putting it but if you would like a formula this one is an easy one to remember: