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

Determine investment allocation that maximises expect npv, Suppose that $4 ...

Suppose that $4 million is available for investment in three projects.  The probability distribution of the net present value earned from each project depends on how much is invest

Depreciation, This is the amount charged due to the usage and passage of ti...

This is the amount charged due to the usage and passage of time. Fixed assets are utilized for earning revenue. Thus, a decrease in their value is considered to be the operational

Accounting, Ask What is the major value of the weighted cost of capital cal...

Ask What is the major value of the weighted cost of capital calculation for the firm? question #Minimum 100 words accepted#

Calculate the direct labor, A CPA firm estimates that an audit will require...

A CPA firm estimates that an audit will require the following work: Type of Auditor Expected Hours Cost per Hour Standard Costs Manager 10 $50 $ 500 Senior 20 40 800 Staff 40 30

Calculate break even point using a mathematical equation, Smart Ltd ha sa u...

Smart Ltd ha sa unit selling price of $500 variable costs per unit of $325 and fixed costs of $140 000. Calculate the break even point in units using (a) a mathematical equations a

Compute the most profitable combination of products, GZ Inc. manufactures t...

GZ Inc. manufactures two products that require both machine processing and labor operations. Although there is unlimited demand for both products, GZ could devote all its capacitie

Purpose of cost accounting information, Purpose of Cost Accounting Informat...

Purpose of Cost Accounting Information Cost accounting is employed for a number of reasons, some of that are briefly described in the given points as: a) Accounting for co

Irr, The following data pertains to an investment proposal: Required invest...

The following data pertains to an investment proposal: Required investment $400,000 Annual cost savings $105,700 Projected life of investment 6 years Projected salvage value $0 Req

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?

Fund flow statement, An analysis of the fluctuations of current assets and ...

An analysis of the fluctuations of current assets and current liabilities that is working capital describes that how the working capital has decreased or increased. We want to iden

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