Break-Even Analysis
Break-even point is the volume of sales at that there is no loss or. Break-even charts graphically show the relationship of cost to profits and volume and display loss or profit at any sales volume in a relevant range
Approaches for break-even analysis
Contribution margin approach
A graph or an equation can be utilized to find out a company's break-even point
Example
Sales price per unit Shs. 10
Unit variable expenses Shs. 4
Fixed expenses Shs. 3600
Contribution margin (Shs. 10 unit sales price - E4 variable expenses)
= Shs. 6 unit contribution margin
Also Contribution margin may be expressed like a total. The given equation shows sales equal expenses since there is no income at the break-even point
x = Units to be sold at breakeven point
s = variable expenses + fixed expenses
Shs. 10x = Shs. 4x + Shs. 36000
Shs.6x = Shs. 36000
X = Shs.36000 Fixed expenses / Shs. 6 unit contribution margin
= 6000 units to break-even