Break Even Chart:
It shows the BEP and indicates the estimated profit or loss at various output levels. The break-even point as indicated in the following graph is the point at which total cost and sales lines intersect.
Example
Determine graphically (a) the Break-even point and (b) the Profit if the output is 25,000 units.
| Out Put (units) | Variable Cost Per Unit Rs. | Total Variable Cost Rs. | Fixed Cost Rs. | Total cost Rs. | Selling Price Per Unit Rs. | Total Sales Rs. |
|---|---|---|---|---|---|---|
| 0 5,000 10,000 15,000 20,000 25,000 30,000 | 5 5 5 5 5 5 5 | 0 25,000 50,000 75,000 1,00,000 1,25,000 1,50,000 | 75,000 75,000 75,000 75,000 75,000 75,000 75,000 | 75,000 1,00,000 1,25,000 1,50,000 1,75,000 2,00,000 2,25,000 | 10 10 10 10 10 10 10 | 0 50,000 1,00,000 1,50,000 2,00,000 2,50,000 3,00,000 |
Assumption of Break-Even Chart
- All costs can be segregated between fixed and variable.
- Variable cost per unit remains fixed throughout the year.
- Fixed cost remains fixed throughout the year.
- The selling price per unit remains unchanged at all levels of activity.
- There is no opening or closing stock.
- The effectiveness of operations won’t change.
- The output or production volume is the only factor influencing the cost.