Break Even Analysis

A Specific method of presenting and

studying the inter relationship between
costs, volume and profits.(CVP Analysis)
An * tool of financial analysis – impact on

Profit with a change in volume, price, costs

and mix – accuracy.
 A business is said to be breakeven when its

Total sales = Total cost

 Break Even point is a point where no
profit or loss .
 At this point FC = Contribution
 BEP Calculation
 BEP (in units) = FC/ contribution Per Unit

= FC/ SP-VC

 BEP (sales) = FC/ contribution Per Unit *Selling price

 = FC / P/v ratio

 BEP = FC/FC+NP *sales

 BEP = FC/Contribution *total sales

Volume of output sales to made to
earn a desired level of profit

 Units to earn a desired level of profit:

= FC +Desired Profit /Contribution Per Unit

 Sales to earn a desired Profit:

= FC+ Desired Profit /P/vRatio

 Calculate the BEP

 Production in units =10000

 Sales price = Rs 5/- per unit

 Variable costs = Rs 20000

 Fixed costs = Rs 12000/-

 The total fixed cost of a company are Rs

210000/- per annum;Variable cost per unit is

Rs 7/-.The company sells products at Rs 10/-
each. Compute the units of sales and amount
of sales at which the company will breakeven.
 Calculate BEP

The fixed costs for the year are Rs 80,000;

variable cost per unit for the single product being

made is Rs 4/-.Estimated sales for the period are
valued at Rs 200000/-.The no of units involved
coincides with the expected volume of output.
Each unit sells at Rs 20/-
 Find BEP in units

 Selling price per unit = Rs 12/-

 Variable Cost per Unit Rs 7/-

 Fixed costs Rs 1,75,525

A company budgets its marginal contribution as Rs

45,000/- .The sales and fixed costs are budgeted

as 225000/- and 60000/-.calculate breakeven

sales.
A company estimates that next year it will earn a

profit of Rs 50,000.The budgeted fixed costs and

sales are Rs 2,25,000/- and Rs 9,93,000

respectively. Find out the breakeven point of the

company.