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

MATERIALCOSTING, what are the material management questions

what are the material management questions

Absorption, Under which inventory costing method could increases or decreas...

Under which inventory costing method could increases or decreases in income from operations be misinterpreted to be the result of operating efficiencies or inefficiencies?

Prepare cost sheet, The Pacific Manufacturing Company operates a job-order ...

The Pacific Manufacturing Company operates a job-order costing system and applies overhead cost to jobs on the basis of direct labor cost. Its predetermined overhead rate was based

Break Even point, #question.ABC Corportaion produces and sell two products....

#question.ABC Corportaion produces and sell two products. In the most recent month, Product 123 had sales of $33,000 and variable expenses of $15,840. Product 245 had sales of $42,

Storage and issue of material, Storage and Issue of Material A number ...

Storage and Issue of Material A number of questions are relevant in this control of materials throughout storage and question of materials. These are as: a) Stock control r

Measuring performance in organization, list and discus the problem encounte...

list and discus the problem encountered in adopting profit as a yardstick in measuring performance

Calculate the loss in consumer surplus, (a) Calculate the number of US impo...

(a) Calculate the number of US imports with and without the tariff. (b) Calculate the dead weight loss of the tariff. (c) Calculate the loss in consumer surplus resulting fro

Job costing, the features and scopes of job costing

the features and scopes of job costing

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