I.

Breakeven Point
A. Breakeven Point for Single Products

BEPunits ( solve for Q )=0=( USP x Q )−( UVC x Q )−TFC

TFC
BEPunits=
USP−UVC
TFC
BEPunits=
UCM
BEP pesos ( solve for USP x Q )=0=( USP x Q )−( UVC x Q )−TFC

TFC
BEP peso =
CMR
BEPunits= Actual∨Budgeted Sales∈Units−MOS units

BEP pesos = Actual∨Budgeted Sales∈ pesos x (1−MOS % )

B. Breakeven Point for Multi-Products

TFC
Composite BEP /BEP combined units=
Weighted Avereage UCM
TFC
Composite BEP /BEP combined units=
Weighted Avereage CMR

( UCM of A x No .of units per Mix ) + ( UCM of B x No . of units per Mix ) + …

Weighted Average UCM =
Total number of units per Sales Mix
UCM x No . of units per Sales Mix
Weighted Average UCM =∑
Total number of units per Sales Mix
Total Weighted CM
Weighted Average CMR=
Total Weighted Sales
Weighted UCM
Weighted Average CMR=
Weighted USP
CMR x Sales per product
Weighted Average CMR=∑
Total Sales for the whole sales mix

C. Other Relevant Formulas

UCM=USP−UVC
CM =Total Sales−Total Variable Costs
Total VC
VCR=
Total Sales
UVC
VCR=
USP
CM
CMR=
Total Sales
UCM
CMR=
USP
Change∈ Profit
CMR=
Change∈ Sales
CMR=1−VCR
Legend:

BEPunits=Breakeven point ∈terms of number of units

BEP pesos =Breakeven point ∈terms of peso sales

USP=Unit Selling Price

UVC=Unit Variable Cost
TFC =Total ¿ Cost
MOSunits= Margin of safety ∈terms of number of units

Q=Quantity∨Number of Units
UCM =Unit Contribution Margin
CM =Contribution Margin(Total)
CMR=Contribution Margin Ratio
VCR=Variable Cost Ratio
MOS pesos =Margin of safety ∈terms of pesos

II. REQUIRED SALES CONSIDERING DESIRED PROFIT

The break-even formula may be expanded to compute for the required sales (in units or in
pesos) to earn a desired amount of profit.
 Relevant Formulas
1. Single Product
a. Desired Profit before Tax

TFC + Desired Profit

Required Sales∈Units=
UCM
TFC + Desired Profit
Required Sales∈Pesos=
CMR

b. Desired Profit after Tax

Desired Profit
TFC +[ ]
1−Tax %
Required Sales∈Units=
UCM
Desired Profit
TFC +[ ]
1−Tax %
Required Sales∈Pesos=
CMR
c. Desired Profit Ratio
TFC
Required Sales∈Units=
UCM −Profit per unit
Profit per unit=USP x Proft Ratio
TFC
Required Sales∈Pesos=
CMR−Profit Ratio

2. Multiple Products
a. Desired Profit before Tax
TFC + Desired Profit
Required Sales∈Units=
Weighted Average UCM
TFC + Desired Profit
Required Sales∈Pesos=
Weighted CMR

b. Desired Profit after Tax

Desired Profit
TFC +[ ]
1−Tax %
Required Sales∈Units=
Weighted Average UCM
Desired Profit
TFC +[ ]
1−Tax %
Required Sales∈Pesos=
Weighted CMR
III. MARGIN OF SAFETY

MOSunits = Actual∨Budgeted Sales∈Units−BEP units

MOSunits = Actual∨Budgeted Sales∈Units x MOS %

MOS pesos = Actual∨Budgeted Sales∈Pesos−BEP pesos

MOS pesos = Actual∨Budgeted Sales∈Pesos x MOS %

MOS units
MOS %=
Actual∨Budgeted Sales∈Units
MOS pesos
MOS %=
Actual∨Budgeted Sales∈Pesos
Profit Ratio
MOS %=
CMR
Profit
MOS %=
CM
1
MOS %=
DOL
BEP pesos
MOS %=1−
Actual∨Budgeted Saes
III. DEGREE OF OPERATING LEVERAGE

CM
DOL=
EBIT ∨Income∨Profit before Tax
% △∈EBIT
DOL=
% △∈Sales
¿Costs
DOL=1+
Income∨EBIT
1
DOL=
MOS %
IV. INDIFFERENCE POINT

Indifference Point ∈Units ( solve for X )=CM 1 ( X )−FC 1=CM 2 ( X )−FC 2

( FC of 1−FC of 2)
Indifference Point ∈Units=
(UCM of Alternative 1−UCM of Alternative 2)