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

Calculate the break-even in units under each option, o locate a store, but ...

o locate a store, but the location manager is not sure about the rent method to accept. The mall operator offers the following three options for its retail store rentals: 1. paying

Calculate the put price, Question: Suppose that the stock now sells at ...

Question: Suppose that the stock now sells at $80, and the price will go up by 5% or down by 5% at the end of first six month (t = ½).  Then, the price will either go up by 10%

Time keeping - cost accumulation, Time Keeping - Cost Accumulation A l...

Time Keeping - Cost Accumulation A labour cost control routine should ensure that payments are paid only to employees who have spent time at the work place and that payments a

Marginal analysis, Marginal analysis finds to equalize the cost of producin...

Marginal analysis finds to equalize the cost of producing one more item (marginal costs) with the revenue gained from selling one more item (marginal revenue).

introduction of internal rate of return , Introduction of Internal Rate of...

Introduction of Internal Rate of Return The traditional internal rate of return (IRR) method of project selection has been shown to be inferior to the NPV method due to vario

Income statement - cost accunting, Income Statement - Cost Accunting: ...

Income Statement - Cost Accunting: A starting entrepreneur has come up with a plan to start a Gaming Outlet in Haarlem. He would like to buy a building which will cost € 700.0

EXPECTED CASH COLLECTIONS, WORKED EXAMPLES OF EXPECTED CASH COLLECTIONS PAT...

WORKED EXAMPLES OF EXPECTED CASH COLLECTIONS PATTERNS

Estimating the number of shares with returns less, The file A1Q1 contains d...

The file A1Q1 contains data for the percentage change in the price of 50 shares selected at random from the Australian Stock Exchange. The data refer to the percentage change in th

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