The break-even point for a product is the point where total revenue received equals the total costs associated with the sale of the product (TR=TC). [1]A break-even point is typically calculated in order for businesses to determine if it would be profitable to sell a proposed product, as opposed to attempting to modify an existing product instead so it can be made lucrative. Break even analysis can also be used to analyse the potential profitability of an expenditure in a sales-based business. break even point (for output) = fixed cost / contribution per unit contribution (p.u) = selling price (p.u) - variable cost (p.u) break even point (for sales) = fixed cost / contribution (pu) * sp (pu)

|Contents |
|[hide] |
|1 Margin of Safety |
|2 In unit sales |
|3 In capital budgeting |
|4 Internet research |
|5 Limitations |
|6 References |
|7 Bibliography |
|8 External links |

[pic][edit] Margin of Safety

Margin of safety represents the strength of the business. It enables a business to know that what is the exact amount he/ she has gained or lost over or below the break even point).[2]

Margin of safety = (( sales - break-even sales) / sales) x 100% If P/V ratio is given then sales/pv ratio

[edit] In unit sales

If the product can be sold in a larger quantity than occurs at the break even point, then the firm will make a profit; below this point, the firm will make a loss. Break-even quantity is calculated by: Total fixed costs / (selling price - average variable costs). Explanation - in the denominator, "price minus average variable cost" is the variable profit per unit, or contribution margin of each unit that is sold. This relationship is derived from the...

...BREAK-EVENPOINT
A company's break-evenpoint is the amount of sales or revenues that it must generate in order to equal its expenses. In other words, it is the point at which the company neither makes a profit nor suffers a loss. Calculating the break-evenpoint (through break-even analysis) can provide a simple, yet...

...Calculating the break-evenpoint
To avoid making a loss every business must at least break-even by achieving a level of sales that covers its total costs. But what level of sales is necessary to break-even?
To explore the concept of break-even, we need to define some basic terms:
Fixed costs: Costs that do not vary with output or sales e.g. managers salaries,...

...Definition of BreakEvenpoint:
Breakevenpoint is the level of sales at which profit is zero. According to this definition, at breakevenpoint sales are equal to fixed cost plus variable cost. This concept is further explained by the the following equation:
[Breakeven sales = fixed cost + variable cost]
The break...

...#3
Break-Even Analysis
Rob Holland Assistant Extension Specialist Agricultural Development Center
September 1998
One of the most common tools used in evaluating the economic feasibility of a new enterprise or product is the break-even analysis. The break-evenpoint is the point at which revenue is exactly equal to costs. At this point, no profit is made and...

...fluctuation in EBIT.
15-4. Break-even analysis, as it is typically presented, categorizes all operating costs as being either fixed or variable. Based upon this division of costs, the break-evenpoint is computed. The computation procedure for the cash break-evenpoint omits any noncash expenses that the firm might incur. Typical examples of noncash expenses include...

...Break-evenpoint is that point at which there is neither profit nor loss. It is at point costs are equal to sales. It is otherwise called as balancing point, neutral point, equilibrium point, loss ending point, profit beginning point etc. After BEP is achieved, all the further sales will contribute to profit.
At BEP, Sales ā Variable cost = Fixed...

...Contribution Margin and BreakEvenPoint
by
ACC 202
Trident University
July 22, 2011
Contribution Margin and BreakEvenPoint
Iām going to discuss Contribution margin and what it is and how it relates to companies and profits. Contribution margin is the amount remaining from sales revenue after variable expenses have been deducted. It is the amount available to cover fixed expenses such as...

...to use?
b) Break-Even Analysis ā Systems of Equations Application Problem
Suppose a company produces and sells pizzas as its product. Its revenue is the money generates by selling x number of pizzas. Its cost is the cost of producing x number of pizzas.
Revenue Function: R(x) = selling price per pizza(x)
Cost Function: C(x) = fixed cost + cost per unit produced(x)
The point of intersection on a graph of each function is called the...

279 Words |
2 Pages

Share this Document

Let your classmates know about this document and more at StudyMode.com

## Share this Document

Let your classmates know about this document and more at StudyMode.com