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

Cost book-keeping, Cost Book-Keeping In cost account accounts, extensi...

Cost Book-Keeping In cost account accounts, extensive employ is made of control accounts that are based in the similar principles as those utilized in financial accounts.  Two

Compute the operating income for each of the five customers, Handy-Man Serv...

Handy-Man Services is a repair-service company specializing in small household jobs. Each client pays a fixed monthly service fee based on the number of rooms in the house. Records

Calculate the equivalent annual cost, A plant is considering the replacemen...

A plant is considering the replacement of a piece of equipment in its materials handling system with a new piece. If the company's cost of capital is 10%. Should the present asset

British Columbia Lumber has a Raw Lumber Division, British Columbia Lumber ...

British Columbia Lumber has a Raw Lumber Division and a Finished Lumber Division. The  variable costs are: 1.Raw Lumber Division: Rs. 100 per 100 board-feet of raw lumber 2.F

cost classification, Explain the value attached to this common exercise un...

Explain the value attached to this common exercise undertaken by Accountants.

Investment, under which type of asset the investment comes

under which type of asset the investment comes

Determine the expected return, Imagine a world in which there are only two ...

Imagine a world in which there are only two investment assets: Hasbro Inc. Stock (HAS) and McDonalds stock (MCD). The table below lists annual total returns (%) for each of the las

Analysing changes in working capital, By understanding the financial statem...

By understanding the financial statements of a company, one of the first steps considered is the study of the changes in current financial position of the company and the purpose f

What does the cost principle, What does the cost principle mean for a compa...

What does the cost principle mean for a company's income statement?

Manufacturing costs, manufacturing costs will not include a. indirect mater...

manufacturing costs will not include a. indirect material used b. sales salaries expense c. indirect labor costs d. depreciation of factory equipment

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