Break-even calculations, Cost Accounting

Assignment Help:

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


Related Discussions:- Break-even calculations

Outstanding expenses, Expenses are usually recorded only while they are pai...

Expenses are usually recorded only while they are paid. The failure to record unpaid expenses in the accounts outcomes in an understatement of which expense and also an understatem

Standards on motivation, ADescribe the impact of different types of standar...

ADescribe the impact of different types of standards on motivations, and specifically, the likely effect on motivation of adopting the labor standard recommended for Geeta & Compan

Marginal costing, sums with solution of marginal costing

sums with solution of marginal costing

Overhead analysis, allocate the overheads to the three departments and do t...

allocate the overheads to the three departments and do the secondary allocation of service departments

Cost accountant and cost analysis, Cost Accountant and Cost Analysis ...

Cost Accountant and Cost Analysis Cost Accountant Is a member of chief accounting officers department? And he is responsible for collecting product costs and preparing ex

Limitations of standard costing, L I M I T A T I O NS OF STANDARD ...

L I M I T A T I O NS OF STANDARD COSTING 1.     It may be very difficult to fix standards for all operations. 2.     Incorrect standards may result in wastage of mo

Determine controllable margin and total contribution, Phelps Glass Inc. has...

Phelps Glass Inc. has reported the following financial data: net revenues of $10 million, variable costs of $5 million, controllable, fixed costs of $2 million, non-controllable fi

Applications of funds, Requirement for additional Funds A business would...

Requirement for additional Funds A business would require additional capital for two purposes: 1. Financing additional fixed assets, and

What is the total cost of the work in process, The Cutting Department of th...

The Cutting Department of the Rock Island Custom Cabinetry Corporation (a process costing production) had no work in process at the beginning of the period, 12,000 units were compl

Marvin''s motors company (mmc) manufactures outboard, Marvin's Motors Compa...

Marvin's Motors Company (MMC) manufactures outboard motors for use on small to medium sized boats. MMC produces three models: the Standard, the Deluxe and the Performance. The comp

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd