Event Operations Manual
Software for Club Treasurers

Break-Even Analysis (Simple)

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:

Venue Hire
Advertising and Promotion Costs
Telephone, Postage and Stationery
Total Fixed Costs

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

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:

Each competitor will receive
Food and drink
Variable Costs per Competitor

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. The term break-even means that all event costs will just be covered by the income he receives from the competitors.

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:

Competition Entry Fee
Variable Costs per Competitor
Contribution of each Competitor
towards Fixed Costs

Total Fixed Costs
divided by Contribution
No of competitors required is 1000/5 = 200

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:

Formula for Break-Even Point
Fixed Costs
Price - Variable Costs
Don't forget that (Price - Variable Costs) = Contribution


Copyright Leo Isaac 2002

Copyright and Disclaimer | About the author Leo Isaac | Email Webmaster