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BREAK EVEN ANALYSISBreak even analysis is mainly used to explain the relationship between the cost incurred, the volume operated at and the profit earned. To compute the breakeven point we let
S be selling price per unitVu be variable cost per unitQ be break-even quantitiesF be total fixed costsAt Breakeven point:
Total revenue (TR) = Total Cost (TC)
Total revenue will be given by SQ while Total cost (TC) = Vu Q + F
At break-even point (BEP) therefore:
SQ = Vu Q + FQ = F S- VuB.E.P (in units) = F S- Vu
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EOQ mathematical model As costs of ordering and holding stock are equal at the EOQ point, we can build a simple mathematical model to solve the problem, as follows: (Q/ 2) X
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Explain the Break-Even Analysis The study of cost volume profit analysis is often referred to as break-even analysis and the two terms are used interchangeably by many. This i
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