Analysing BEP

( BEP) Break-even point is a point where an

investor or a businessman does not make any
profit or loss.

The BEP is the point at which cost or expenses and revenue

are equal
There is no net loss or gain
This point is important to determine the lowest price of a
product.
The management can use the break-even point
for various specific reasons.

Two common functions of calculating the break-even

point are to :
Plan and control costs with respect to sales
Measure and monitor sales performance
Contribution Margin (CM)
is the amount generated by sales to cover fixed costs

Contribution Margin = Selling price – Variable costs

CM = p - VC
Contribution margin ratio(CMR)
indicates the percentage of sales available to cover
fixed costs and contributes towards profit.

Contribution Margin Ratio = (Selling Price – Variable costs) x 100

CMR = p – VC x100

p
A break-even point may be expressed in terms
of quantity or value of sales.

BEP (units) = FC = FC
p – VC CM
BEP(RM) = FC = FC
p – VC/p CMR