Break-even calculations, Cost Accounting

Break-Even Calculations

As they say, a picture is significance a thousand words, and this is undoubtedly true for the CVP graphic just presented. Though, everyone is not an artist, and you may find it more precise to perform a little algebra to calculate/compute the break-even point. Let's consider:

Break-even results when the:

Sales = Total Variable Costs + Total Fixed Costs

For Leyland, the math comes out this way:

(Units X $2,000) = (Units X $800) + $1,200,000

Further Solving:

Step a: (Units X $2,000) = (Units X $800) + $1,200,000

Step b: (Units X $1,200) = $1,200,000

Step c: Units = 1,000

Now, it is possible to "jump to step b" above by separating the fixed costs by the contribution margin per unit. Hence, a break-even short cut is:

Break-Even Point in Units = Total Fixed Costs / Contribution Margin Per Unit

1,000 Units = $1,200,000 / $1,200

At times, you might want to know the break-even point in dollars of sales (rather than units). This approach is particularly useful for companies with more than one product, where all these products all have almost same contribution margin ratio:

Break-Even Point in Sales = Total Fixed Costs / Contribution Margin Ratio

$2,000,000 = $1,200,000 / 0.60

Posted Date: 7/21/2012 4:21:19 AM | Location : United States







Related Discussions:- Break-even calculations, Assignment Help, Ask Question on Break-even calculations, Get Answer, Expert's Help, Break-even calculations Discussions

Write discussion on Break-even calculations
Your posts are moderated
Related Questions
Morrow Company applies overhead based on direct labor hours. At the beginning of the year, Morrow estimates overhead to be $620,000, machine hours to be 180,000, and direct labor h

looking for a dissertation of cost allocation

Assume your grandparents have just given you $20,000 on the condition that you invest the money in the stock market. As you contemplate making your investment choices, what accoun

EARNINGS AFTER TAX-1500000 NUMBER OF EQUITY SHARE OUTSTANDING-300000 DIVIDEND PAID 600000 PRICE-EARNING RATIO-101 RATE OF RETURN ON INVESTMENT-20% WHAT IS OPTIMUM DIVIDEND PAY OUT

Dividends                                                                                        ................ Non-operating losses not passed through P and L A/c

Illustration of Overhead Variance Analysis Again for intentions of our demonstrations in overhead variance analysis, we will suppose the given basic data for company in the pr

Marginal Cost (MC): The marginal cost of an additional unit of output is the cost of the additional inputs required to make that output. More formally, the marginal cost is the

Draw the relevant diagrams for a typical farm, and for the market as a whole, when the market for wheat is in long run equilibrium. Assume the farm faces perfect completion. (hint,

The total demand (marginal benefit) curve for visiting Yosemite is as follows: Price = 5000-10*NumberOfTrips -10*TonsOfVisibleTrash.     a. Suppose the quantity of trash=100 ton

Kenner company produces two products: SR200 and TX500. Budged sales for four months are as follows; SR200 TX500 May 8,000 20,000 June 13,000 32,000 July 11,000 39,000 August 18,000