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

Basic earnings per share, What are 'potential' ordinary shares?  In your an...

What are 'potential' ordinary shares?  In your answer provide three examples to support your explanation.  Briefly outline the process (steps) to determine whether 'potential' ordi

What is the overall purpose to the statement of cash flows, 1.    Provide...

1.    Provide at least three characteristics of a corporation (in your own words).   2.   The date on which a cash dividend becomes a binding legal obligation is known

Calculate average cost and marginal cost, Farmer Dorr figures that her fixe...

Farmer Dorr figures that her fixed costs are $2,000, and the relevant portion of her total cost curve is:                                           Thousands of

Cost sheets, Describe the information about cost sheets? Ans) Cost sheet...

Describe the information about cost sheets? Ans) Cost sheet having of the direct and indirect expenses acquired in producing a given product and classifying the expenses acquire

Cost Accountng, a local government autority owns and operates a leisure cen...

a local government autority owns and operates a leisure center with numerous sporting facilities , residential accomodation , a cafeterial and a sports shop. the summer season last

Activity Based Costing, How do I figure the estimated activity and estimate...

How do I figure the estimated activity and estimated allocation base?

Calculate contribution to sales ratio, Q. Calculate contribution to sales r...

Q. Calculate contribution to sales ratio? Contribution per unit= sales price per unit less variable cost per unit Break-even volume = Fixed overhead/Contribution per uni

Government and nonprofit accounting, I need project help in Government and ...

I need project help in Government and nonprofit accounting, can you help me in look out this problems?

Determining working capital requirements, Understanding the existing capita...

Understanding the existing capital requirements and how these are financed will assist us in understanding the process of financing of business and the flow of funds inside the bus

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