Students can solve these numerical quickly and accurately after they have a thorough understanding of the concept of break-even analysis. Draw a break-even chart depicting the break-even point and determine the profit earned at this current situation. The company expects to sell 15,000 units of the product whereas it has a maximum factory capacity of 20,000 units. Calculate the number of products a company needs to manufacture to attain a profit target of Rs.10,000.Ĭheck the following table to know about cost analysis for 6 months of a business operation.ĭraw break-even chart for the 6 months of business operationĭetermine the profit earned by an organizationįixed costs of an enterprise is Rs.3,00,000, and the variable cost and selling price of the product is Rs.42 per unit and Rs.72 per unit, respectively. Fixed cost incurred by a company for a period stands at Rs.40,000. In this case, the value of total sales made by the company at their break-even point will be equal to (2500*50) Rs.1,25,000.Ī company produces goods at a variable cost of Rs.12 per unit, and the same is sold at Rs.20 per unit. They need to multiply the break-even point with the sale price per unit to do so. This can further help companies in determining the total sales achieved by the company then. This means a company will have to sell at least 2500 units of the product to overcome these fixed and variable costs incurred for production. So, from the above break-even analysis, it is evident that BEP (break-even point) for ABC enterprises stands at 2500. The company sold these goods with a sale price per unit of Rs.50.īreak-even point = 50,000/ (50-30) = 2500 units Let us understand this equation by taking a break even analysis example mentioned as follows.Ī factory ABC Enterprises produces a particular kind of good wherein the total fixed costs stands at Rs.50,000 and variable cost to produce a good is Rs.30. Variable cost is the cost to produce one unit of product. For example, rent, loans, insurance premiums, etc. To understand this further, consider this formula.īreak-even point = Fixed Cost / (Price per cost - Variable cost) = Fixed Cost / Gross Profit Marginįixed cost refers to the cost incurred in a business unit, which doesn’t depend upon the volume of production. Since this calculation reveals such vital information of a business, it is a necessity to learn and calculate break-even points accurately. Reaching this point indicates that a business has overcome all the expenses and no more in a state of loss. In a business scenario, the break-even point is a perimeter at which the total expenses of the enterprise equals the total revenue generated. Reaching this break-even point means that a company is no more in a state of loss. It helps businesses calculate the volume of products that need to be sold so that a company overcomes all the initial cost of investment. Break-even analysis is an essential economic tool that helps to determine the point beyond which a company earns a profit.
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |