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    Breakeven Analysis Assignment Help

    Breakeven Analysis Assignment Help

    Breakeven Analysis Assignment Help


    Breakeven point

    The breakeven point for a company is the sales volume which will give the company a profit of £nil. If sales exceed the breakeven point (BEP) the company will make a profit. Breakeven analysis is often referred to as cost-volume-profit analysis.


    We will assume that selling price per unit, variable cost per unit and fixed costs are all constant. Sales revenue and total costs will therefore both be linear.

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    At the break-even point (BEP) the total revenue and total sales are equal

    If we call volume V then total revenue at the BEP will be price (or revenue per unit) x V.

    Total costs = Fixed costs + (variable cost p.u. x V)

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    Accountants give the difference between the selling price per unit and variable cost per unit a special name – contribution. This is because it contributes towards covering the fixed costs.

    So we can write the equation such that at the break-even point:

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    Example: ABC Co

    ABC has the following information, relating to Product X, its only product:

    Selling price  £300 p.u.

    Variable cost  £160 p.u.

    Fixed costs p.a.  £140,000 

    What is the BEP?

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    If the plan is to produce and sell 1,200 units, what is the margin of safety? The margin of safety is the number of units above BEP expressed as a percentage of expected sales volume. In this case it would be:

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    Limiting Factors

    In a situation where resources are scare, the scarce resource (limiting factor) should be used to produce the product that has the highest contribution per unit of limiting factor.

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