Breakeven Equation

# Breakeven Equation - units. Thus, Break-even Sales Units =...

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Break-even is the point of zero loss or profit. At break-even point, the revenues of the business are equal its total costs and its contribution margin equals its total fixed costs. Break-even point can be calculated by equation method, contribution method or graphical method. The equation method is based on the CVP analysis formula: px = vx + FC + Profit Where p is the price per unit, x is the number of units, v is variable cost per unit and FC is total fixed cost. Calculation BEP in Sales Units At break-even point the profit is zero therefore the CVP analysis formula is simplified to: px = vx + FC The above equation is then algebraically solved for x which equals break-even point in sales
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Unformatted text preview: units. Thus, Break-even Sales Units = x = FC / ( p v ) BEP in Sales Dollars Break-even point in amount of sales dollars is calculated via following formula: Break-even Sales Dollars = Price per Unit Break-even Sales Units Example Calculate break-even point in sales units and sales dollars from following information: Price per Unit \$15 Variable Cost per Unit \$7 Total Fixed Cost \$9,000 Solution We have, p = 15, v = \$7 and FC = \$9,000 15x = 7x + 9,000 or 15x 7x = 9,000 or 8x = 9,000 which gives, Break-even in Units = x = 1,125 units Break-even Point in Sales Dollars = \$15 1,125 = \$16,875...
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## This note was uploaded on 04/03/2012 for the course ACCT 275 taught by Professor Stangota during the Spring '09 term at Rutgers.

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