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Break Even Analysis
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Break Even Analysis:
When sales profit contribution after direct costs = fixed costs, this is the break even point.
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To construct a break-even analysis chart you need to know:
1. The variable costs per $ of sales.
2. The level of fixed costs per period.
Example:
1. The fixed costs of a business amount to $750,000 per annum.
2. The average price per unit is $29.95.
3. The average variable cost per unit is $12.45.
The profit contribution per Unit is $29.95 - $12.55 = $17.50.
The break even number of Units = 750,000/17.5 = 42,857 (42,857 x $17.50 = $750,000).
If the company sells 50,000 Units, the annual profit will be (50,000 - 42,857) x $17.50 = $125,002.
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Download Files
Break Even Analysis
Reference Pages
Absorption Costing
Marginal Costing
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