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

What is the cost of goods manufactured, information for the year ended Dece...

information for the year ended December 31, 2010: Direct labor $16,840 Direct material used 16,300 General and administrative expenses 14,240 Indirect production costs 16,780 Selli

Determine internal rate of return and cash flow statement , A local deliver...

A local delivery company has purchased a delivery truck for $15,000.  The truck will be depreciated under MACRS as a five year property.  The trucks market value (salvage value)

Standard costing system, Standard costing System has the following main adv...

Standard costing System has the following main advantages or benefits: 1. The process in itself often discloses inefficiencies, because the setting of standards requires a thoro

Cash flows statement, What type of activity could a company engage in to im...

What type of activity could a company engage in to improve their cash flows in their Cash Flows Statement? Is this ethical? Could borrowing money make the cash from operations be

Calculate development cost, Candler Inc a computer software development fir...

Candler Inc a computer software development firm has stock outstanding as follows: 40,000 shares of $2 nonparticipating, noncumulative preferred stock of $10 par, and 250,000 share

Overhead costs, Overhead Costs Introduction Overhead costs may be...

Overhead Costs Introduction Overhead costs may be defined like the net cost of indirect materials, indirect expenses and indirect labour. They may happen or be charged to

Relationship among variances, Relationship among variances We cannot o...

Relationship among variances We cannot over emphasize the central aim of variance analysis as outlined in the above paragraphs:  that is to assign responsibility for a particu

Methods required to allocate joint costs, Methods Required To Allocate Join...

Methods Required To Allocate Joint Costs 1) Physical/Unit Measure 2) Constant gross margin rate 3) Net realizable value.

Material cost, distinguish between bin card and store ledgre

distinguish between bin card and store ledgre

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