Break Even Point Calculation Examples, Concept, Illustration, Sample Help Online
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Understanding the concept of Break Even Point
Break-even point is the point of no profit no loss. Here the revenues are equal to its cost and margin of contribution is equal to its fixed cost. There are three methods of Break Even Point Calculation
1. Contribution method
2. Equation method
3. Graphical method
Formula for calculation of BEP by Equation method, we use the cost-volume-profit (CVP) formula
px = vx + FC + Profit
Where,
p is the price per unit,
x is the number of units,
v is variable cost per unit and
FC is total fixed cost.
BEP in Sales Units
As the profit is zero at break-even-point therefore, the CVP formula is: px = vx + FC
Solving the above equation for x which equals break-even point in sales units, we get
Break-even Sales Units = x = FC/p – v
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Break Even Point Calculation Examples Explanation
Let’s understand the concept through an example.
Example: Price per Unit $15
Variable Cost per Unit $7
Total Fixed Cost $9,000
Solution: We have,
p = $15
v = $7, and
FC = $9,000
By putting the values for breakeven point in sales units, we get
Breakeven Point in Sales Units (x)
= 9,000 ÷ (15 − 7)
= 9,000 ÷ 8
= 1,125 units
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