![Breakeven Analysis
[Name]
Amounts show n in U.S. dollars
Sales
Sales price per unit 12.50
Sales volume per period (units) 1,000
Total Sales 12,500.00
Variable Costs
Commission per unit 2.00
Direct material per unit 2.50
Shipping per unit 1.10
Supplies per unit 0.80
Other variable costs per unit 1.20
Variable costs per unit 7.60
Total Variable Costs 7,600.00
Unit contribution margin 4.90
Gross Margin 4,900.00
Fixed Costs Per Period
Administrative costs 1,200.00
Insurance 500.00
Property tax 150.00
Rent 800.00
Other fixed costs 750.00
Total Fixed Costs per period 3,400.00
Net Profit (Loss) 1,500.00
Results:
Breakeven Point (units): 694
Sales volume analysis:
Sales volume per period (units) 0 100 200 300 400 500 600 700 800 900 1,000
Sales price per unit 12.50 12.50 12.50 12.50 12.50 12.50 12.50 12.50 12.50 12.50 12.50
Fixed costs per period 3,400.00 3,400.00 3,400.00 3,400.00 3,400.00 3,400.00 3,400.00 3,400.00 3,400.00 3,400.00 3,400.00
Variable costs 0.00 760.00 1,520.00 2,280.00 3,040.00 3,800.00 4,560.00 5,320.00 6,080.00 6,840.00 7,600.00
Total costs 3,400.00 4,160.00 4,920.00 5,680.00 6,440.00 7,200.00 7,960.00 8,720.00 9,480.00 10,240.00 11,000.00
Total sales 0.00 1,250.00 2,500.00 3,750.00 5,000.00 6,250.00 7,500.00 8,750.00 10,000.00 11,250.00 12,500.00
Net profit (loss) (3,400.00) (2,910.00) (2,420.00) (1,930.00) (1,440.00) (950.00) (460.00) 30.00 520.00 1,010.00 1,500.00
Unit Contribution Margin
7.60 , 61%
4.90 , 39%
Variable costs per unit
Unit contribution margin
Variable Costs Per Unit
2.00 , 26%
2.50 , 33%
1.10 , 14%
0.80 , 11%
1.20 , 16%
Commission per unit
Direct material per unit
Shipping per unit
Supplies per unit
Other variable costs per unit
An example of a Breakeven Analysis Report](https://image.slidesharecdn.com/tutorialfinal-220809103256-561df063/85/BEA-Tutorial-Final-ppt-9-320.jpg)
BEA Tutorial Final.ppt
- 2. Order of the Slides • Define Breakeven Analysis • Theory behind it • What it can be used for • Breakeven formula • Example • Problem • Conclusion • Reference page
- 3. What is a break-even analysis? • Breakeven Analysis- A decision-making aid that enables a manager to determine whether a particular volume of sales will result in losses or profits
- 4. The theory behind the breakeven analysis • Made up of four basic concepts – Fixed costs- costs that do not change – Variable costs- costs that rise in propitiation to sales – Revenue- the total income received – Profit- the money you have after subtracting fixed and variable cost from revenue
- 5. What can it be used for? • Monthly expenses- use it to see if your income is more then your expenses • Determine minimum price product can be sold for • Determine optimum price product can be sold for • Calculate effects of marketing programs on price
- 6. Breakeven formula • P(X) = f + V(X) • F = fixed costs • V = variable costs per unit • X = volume of output (in units) • P = price per unit
- 7. This chart shows that the breakeven point is where the income and costs are equal
- 8. Breakeven formula cont. • If we rearrange the where the breakeven is X then the formula look like this. X = F /( P – V) • This formula says that the breakeven point is where the number of sales needed to make the cost equal to the revenue.
- 9. Breakeven Analysis [Name] Amounts show n in U.S. dollars Sales Sales price per unit 12.50 Sales volume per period (units) 1,000 Total Sales 12,500.00 Variable Costs Commission per unit 2.00 Direct material per unit 2.50 Shipping per unit 1.10 Supplies per unit 0.80 Other variable costs per unit 1.20 Variable costs per unit 7.60 Total Variable Costs 7,600.00 Unit contribution margin 4.90 Gross Margin 4,900.00 Fixed Costs Per Period Administrative costs 1,200.00 Insurance 500.00 Property tax 150.00 Rent 800.00 Other fixed costs 750.00 Total Fixed Costs per period 3,400.00 Net Profit (Loss) 1,500.00 Results: Breakeven Point (units): 694 Sales volume analysis: Sales volume per period (units) 0 100 200 300 400 500 600 700 800 900 1,000 Sales price per unit 12.50 12.50 12.50 12.50 12.50 12.50 12.50 12.50 12.50 12.50 12.50 Fixed costs per period 3,400.00 3,400.00 3,400.00 3,400.00 3,400.00 3,400.00 3,400.00 3,400.00 3,400.00 3,400.00 3,400.00 Variable costs 0.00 760.00 1,520.00 2,280.00 3,040.00 3,800.00 4,560.00 5,320.00 6,080.00 6,840.00 7,600.00 Total costs 3,400.00 4,160.00 4,920.00 5,680.00 6,440.00 7,200.00 7,960.00 8,720.00 9,480.00 10,240.00 11,000.00 Total sales 0.00 1,250.00 2,500.00 3,750.00 5,000.00 6,250.00 7,500.00 8,750.00 10,000.00 11,250.00 12,500.00 Net profit (loss) (3,400.00) (2,910.00) (2,420.00) (1,930.00) (1,440.00) (950.00) (460.00) 30.00 520.00 1,010.00 1,500.00 Unit Contribution Margin 7.60 , 61% 4.90 , 39% Variable costs per unit Unit contribution margin Variable Costs Per Unit 2.00 , 26% 2.50 , 33% 1.10 , 14% 0.80 , 11% 1.20 , 16% Commission per unit Direct material per unit Shipping per unit Supplies per unit Other variable costs per unit An example of a Breakeven Analysis Report
- 10. Example Lets say you own a business selling burgers It costs $1.00 to make one burger That’s your V or Variable cost You sell each burger for $2.80 That’s your P or price per unit Your cost for rent, utilities, overhead, etc... is $100,000 per month That's your F or fixed cost
- 11. Example cont. V = $1.00 P = $2.80 F = $100,000 X = F /( P – V) X = 100,000 / ( 2.80 - 1 ) X = 100,000 / ( 1.80 ) X = 55,555 To breakeven you would need to sell 55,555 burgers
- 12. Problem Try out this problem for your self • You own a lemonade stand • It costs you $0.05 to make cup of lemonade • You sell your lemonade for $0.25 • It cost you $50.00 to make the stand • How many cups of lemonade do you have to sell to breakeven? Solve now
- 13. Answer X = F /( P – V) X = 50 / ( .25 - .05 ) X = 50/ ( .20 ) X =250 You would need to sell 250 cups of lemonade to breakeven.
- 14. Conclusion • A Breakeven Analysis is a simple tool to use to determine if you have priced your product correctly • A Breakeven Analysis helps you calculate how much you need to sell before you begin to make a profit. You can also see how fixed costs, price,
- 15. Reference page • A Framework for Management – Gary Dessler • http://www.tutor2u.net/business/pr oduction/break_even.htm 3/1/06 • http://connection.cwru.edu/mbac4 24/breakeven/BreakEven.html 3/1/06 • http://www.dinkytown.net/java/Bre akEven.html 3/1/06 • http://office.microsoft.com/en- us/templates/TC011165121033.asp x 3/1/06