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Breakeven Analysis
Always the Manager ask “ When I Breakeven ? “
The answer is when { the revenue R = the total cost Tc }
Breakeven Is a decision tool related { R , Tc , Profit , and Volume }
Revenue R
Profit = R - Tc
And ;
r = selling price $/item .
v = varible cost $/item .
Equations used in analysis :
9. Annual capacity = No. Items /hr.* No. hr /day * No. days /yeras
[Items/year ] .............[9]
Breakeven R
$ point P
Revenue
T Cost Profit
Tc
Vc
R=Tc
Fc Fc
Loss
Annual Capacity
Q=QBE Q
Items
QBE = Fc / [ r – v ]
It is clear that at QBE the profit P is zero , and the contribution
margin CM is equal to Fc .
Fc P =[r – v].Q - Fc
QBE Q items
- Fc
Required
1. Make complete Breakeven analysis ,draw CVP , and VP charts ,
and fine the annual profit of this mahine at i =20 % .
2. If the the sellinf price increased 10% what is the new Breakeven
Point , and the new profit ?
Solution :
Aw(20%) = -3K(A/p,20%,6) + 2K(A/F ,20%,6) = $ 8.82 K/year the capital
Variable cost v $/item = labour cost $/item + raw material cost $/item
= (10 $/hr ) /(20 item/hr) + 0.8 $/item = 1.3 $/item
Tc
P=30 K Cash flow
31142
10900
15571 30000 Q
CVP chart
Case R Vc Fc Tc P CM CM%
1 500 800 1200
2 2000 300 200
3 1000 700 1000
4 1500 300 40%
Solution :
Case (1) : Tc = Fc + Vc 800= Fc + 500 Fc= 300
P = R - Tc 1200 = R – 800 R = 2000
CM = (r - v) .Q = R – Vc = 2000 - 500 CM= 1500
CM% = CM / R = 1500/2000 CM%= 75%
LECTURE is Finished
Thank you