In Business or Economics the Break Even Point (BEP) is the point at which the total of fixed and variable costs of a business becomes equal to its total revenue. At this point, a business neither earns any profit nor suffers any loss. The following graph explains all the concepts used to find out the break even point:
Let’s consider an online Bakery that specialises in selling Birthday Cakes online. The owner of the bakery has estimated all the costs involved and grouped them into two categories:
- Fixed Costs: These costs will remain the same and do not vary depending on the number of cakes being sold. They include:
- The rent,
- Purchasing Cooking Equipment,
- Utility Bills,
- Website (Setup and maintenance/hosting).
- Variable Costs: These costs will vary depending on the number of cakes being sold. They include:
- Delivery Fees.
The total costs of this online bakery consist of the fixed costs plus the variable costs and can be calculated using the following formula:
The revenues of this online bakery consist of the money received when selling cakes. They can be calculated using the following formula:
The question we are trying to answer is as follows:
We can answer this question using the following formula:
We have listed all the costs of our online bakery, both fixed and variable into a text file.
The average price per cake is £16.00.
Use a Python program to extract the relevant information from the text file in order to:
- Calculate the sum of all fixed costs.
- Calculate the sum of all variable costs.
- Find out the break even point for this business: how many cakes will need to be sold to cover all the costs and start making a profit?
The text file we will use contains one line per cost as follows:
To complete this challenge you will need to read more about how to read through a CSV file.