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Define Break-Even Analysis.

Posted on May 26, 2023May 27, 2023 by dolykundu00@gmail.com

Break-Even Analysis:

It refers to a technique of determining the level of operations where total revenues equal total expenses i.e. the point of no profit no less.

Computation of Break-Even Point

$$Sales\;revenue\;at\;B.E.\;P.\;=\;F\;+\;V$$

a) Break-even Point in Units:

$$B.E.P.(UNITS)\;=\frac{\;(Fixed\;\cos t)}{(Selling\;Price\;per\;unit\;-\;Variable\;\cos t\;per\;unit)}$$

$$or,\;B.E.P.(UNITS)\;=\;\frac F{(Contribution\;per\;unit)}$$

BEP in terms of Money

$$S\;=\;F\;+\;V$$

$$or,\;S\;-\;V=F$$

$$or,\;\frac{(S-V)}V\;\;=\;\;\frac F{(S-V)}$$

$$or,\;1\;=\;\frac F{(S-V)}$$

$$or,\;S\;=\;\frac{(F\times S)}{(S-V)}$$

$$Therefore,\;B.E.P.\;=\;\frac{(Fixed\;Cost)}{(Sales\;-\;Variable\;Cost)}\times\;Sales$$

$$or,\;B.E.P.\;=\;\frac FC\times\;S$$

$$With\;\frac PV\;-\;Ratio\;B.E.P.\;=\;\frac F{(P/V\;-\;Ratio)}$$

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