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

EXPECTED CASH COLLECTIONS.PRACTICE QUESTIONS, WORKED EXAMPLES OF EXPECTED C...

WORKED EXAMPLES OF EXPECTED CASH COLLECTIONS PATTERNS

Bird house, Develop costing for the production units to explain the manufac...

Develop costing for the production units to explain the manufacturing expenses that the proposed product will require for the first year of production. This portion requires the fo

Prepare an eps summary for income statement, You are thinking of investing ...

You are thinking of investing in one of two corporations, both in the same industry, the XYZ Corporation or the ABC Corporation. Selected data follows: Sales data for the year e

Required the research of the statement of cash flows, This question tested ...

This question tested their knowledge of intended reporting but more importantly requisite them to apply their knowledge and consider the impact from the investors' perspective.

Calculate the current stock price, The Bloomington Electric Company operate...

The Bloomington Electric Company operates in a stable industry and therefore has predictable dividend growth of 8% per year. The most recent annual dividend was paid yesterday in t

Material costs, Material Costs Material refers to each physical input ...

Material Costs Material refers to each physical input into the production procedure. They involve the giving as: Raw material refers to bought in material that is used

Profit and loss account, Both the parts, Profit and Loss Account and Tradin...

Both the parts, Profit and Loss Account and Trading Account of last account are interdependent upon each other. Gross Profit or loss plays a very important role in the calculation

Evaluate the expected earning, During his career in the energy industry, T-...

During his career in the energy industry, T-Bone McAdams has accumulated $5,000,000 in "surplus savings" that he is planning to donate to his college alma mater, Oklahoma A&M, in

Which of the four types of costs would include ceo''s salary, Which of the ...

Which of the four types of costs would include a CEO's salary? A. Unit-Level B. Batch-Level C. Product Sustaining D. Facility Sustaining

What is bep, BEP- Break Event Point: It shows no Loss and no Profit The ...

BEP- Break Event Point: It shows no Loss and no Profit The level of activity at which, total revenues equivalent total costs. A point at which there is no profit and no loss.

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