You are on page 1of 1

# Break-Even Analysis

Use this calculator to determine the break-even point for a product: the
UNITS SOLD SALES TOTAL COSTS PROFIT/LOSS
number of units you need to sell for your revenue to equal your costs. Enter
your costs, unit price, and unit increments in the table below. 0 MYR0 MYR65,000 -MYR65,000

## 3,500 MYR21,000 MYR80,750 -MYR59,750

Fixed Costs MYR65,000
7,000 MYR42,000 MYR96,500 -MYR54,500
Variable Cost per Unit MYR4.50
10,500 MYR63,000 MYR112,250 -MYR49,250
Unit Price MYR6.00
14,000 MYR84,000 MYR128,000 -MYR44,000
Unit Increments 3,500.00
17,500 MYR105,000 MYR143,750 -MYR38,750
BREAK-EVEN POINT 43,333
21,000 MYR126,000 MYR159,500 -MYR33,500

## 31,500 MYR189,000 MYR206,750 -MYR17,750

MYR416,667
35,000 MYR210,000 MYR222,500 -MYR12,500
MYR333,333
38,500 MYR231,000 MYR238,250 -MYR7,250
MYR250,000
42,000 MYR252,000 MYR254,000 -MYR2,000
MYR166,667
45,500 MYR273,000 MYR269,750 MYR3,250
MYR83,333 49,000 MYR294,000 MYR285,500 MYR8,500

## MYR0 52,500 MYR315,000 MYR301,250 MYR13,750

0 10,500 21,000 31,500 42,000 52,500 63,000
56,000 MYR336,000 MYR317,000 MYR19,000
Units Sold
Sales Total Costs 59,500 MYR357,000 MYR332,750 MYR24,250

## 70,000 MYR420,000 MYR380,000 MYR40,000

Their fixed cost for this company is RM 65,000 which includes their bank commitments (RM40K), utilities and bills (RM10K) and salary (RM20k) The salary is
paid to management, supporting staffs and basic salary for general staff. The direct labour charges are calculated in operating cost, thus this is the value required by
the company to sustain at zero production.

They calculate their break even point using few assumptions and weighted average calculation. They assume that their profit margin is at 25% which is by
industry standard. This value is also justified by their yearly management accounts report which shows the similar value. Next, they average out the selling price per unit
using the weighted average method, since they have a wide range of products at different unit prices. Once they get the value of the average sales unit, they calculate
the cost unit by reverse calculating that they would make 25% profit margin from the overall sales. As per their calculation, they have to make minimum of RM 70,000
profit with a particular sales value with 25% margin for break even. That value is about RM260,000 from their estimation. Thus, RM 260,000 in revenue with 25% profit
margin gives them RM 70,000 which is their total overhead and that is their break even values. Next what they do is, to be on the safe side, they take the break even
sales value and times that with 1.3, which gives them the sales target of about RM338,000. Then they work to achieve the sales target which guarantees them for a
break even (to cover overhead) and some amount of profit.

The reason they do this because, their business nature is seasonal and they will not be able to do the same sales value through out the year. Thus, they fix a
minimum value target so that, they would be profitable. If they miss the target by some amount, they would simply keep adding the balance value which they missed to
hit, to the following month. They would do about 3 folds the sales during their peak seasons which are about twice a year and that is how they are running their
company.