BREAK EVEN ANALYSIS

 It is a study of costs, revenue and sales of a firm

and finding out the volume of sales. Where the
cost. Revenue and sales will be equal.

 BEP is that level of sales where the net income is

equal to zero.

 No profit and No loss as the cost equal revenues.

BEP in terms of physical Units:

- It is convenient for a firm producing a single

product.
- Firm not earn any profit or loss.
OUTPU IN TOTAL TOTAL TOTAL TOTAL
UNITS REVENUE FIXE COST VARIABLE COST
PRICE Rs. COST
4/- Per unit
0 0 300 0 300

100 400 300 300 600

200 800 300 600 900

300 1200 300 900 1200

400 1600 300 1200 1500

500 2000 300 1500 1800

600 2400 300 1800 2100

• Beyond 300units , the firm’s profit as TR
exceeds TC.
• BEP is no profit and no loss of production.
 Volume of production and volume of sales are
equal.
 The price is constant

Usefulness of BEA:
- It helps to find the profitable region.
- Helps to maximize the profit.
- Helps in Decision making

Purposes of BEA:
1. Safety Margin
( Helps to generate the profit in various levels.)
 Sales - BEP
Safety Margin = Sales
Safety Margin = 500 – 300
500
= 40%
2. Target Profit:
- Helps to fix the target of profit fixed.

3. Change in Price:
- Management consider to change the pricing.
- Price decrease need not increase the sales,

depends on the demand in the market.

Limitations of the BEA:
 It is an static.
 It is not applicable in future
 It is suitable only for small range output
 Other factors are functioned

( Technology change)