Break Even Analysis

Aug 23, 2012

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Break Even Analysis

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1. Break Even Analysis

Break Even Analysis

Break Even Analysis. Lecture 5 This lecture is part of Chapter 2: Budgets, Running a Company. Today’s Lecture. Fixed versus Variable Costs Break Even Analysis Learn how to use the Solver in Excel. Break-Even Analysis.

586 views • 21 slides

Break-even Analysis

. . Break - Even Analysis (Cost/Volume/Profit Analysis). This is a planning and control technique.PLANNING:make informed decisions about pricing your product or service and the cost to produce it.CONTROL:compare your actual results with those that you have forecast. (For example, your restaurant may require you to sell 10,000 meals at $10.00 per meal = $100,000 in order to break even annually. This works out to 192 meals a week or 28 per day. If on the first day of operation you sell 30 m9462

587 views • 21 slides

Break-even Analysis

Break-even Analysis. Use quantitative & graphical methods to calculate break-even quantity. Define & interpret the margin of safety. . What is Break-even?. Total Costs = Total Revenue Measure of quantity How many units need to be sold in order to cover all product costs?

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BREAK EVEN ANALYSIS

BREAK EVEN ANALYSIS. Importance of Planning and Control. Businesses must cover costs or they will make a loss Some new businesses will aim to only cover costs or break-even (ie not make a loss) in the first few years - to get established Profit is the amount made after costs are paid.

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Break Even Analysis

Break Even Analysis. AS Business Studies Produc. Benefits. Shows at a glance break-even output, profit and loss Shows profit or loss made at different output levels Shows output needed to meet profit targets Simple and inexpensive to produce

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Break-Even Analysis

Break-Even Analysis. Company "A" Plans to Sale Units for $100 Variable Cost : Employee Wages $8 per Hour (4 hours per unit) Supplies $1 per Unit Other Variable C ost $2 per Unit Total - $35 Fixed Cost : Depreciation $3,000 Factory Lease $7,000 Advertising Cost $6,000

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BREAK EVEN ANALYSIS

BREAK EVEN ANALYSIS. Break Even Analysis is a method for identification the relationship between costs and volume of output and profit.The point where the sales, revenue equals total cost and there is neither profit nor loss . WHY B.E.P. IS CALCULATED ?

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Break-even Analysis

Break-even Analysis. Fixed Costs. Fixed Costs – Fixed costs are any costs which do not vary directly with the level of output. These costs are linked to time rather than to level of business activity. Fixed costs exist even if a business is not producing any goods or services.

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BREAK EVEN ANALYSIS

BREAK EVEN ANALYSIS. BREAK EVEN ANALYSIS – USES. To analyse level of output/sales needed to make a profit. To measure profit/loss at different levels of output. To analyse sales revenue/total costs at different levels of output. USES - continued.

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Break Even Analysis

Break Even Analysis. Learning Objectives. In today’s lesson you will earn about: Re-cap of cost curves What is meant by revenue and how to calculate it What a revenue curve looks like and how to draw it Construction of a break even chart. Costs. Costs. Total costs. Variable costs.

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Break-even analysis

Break-even analysis. Break-even analysis predicts when…. … Your business is going to start making profit. Evaluate a start-up idea Assess the impact of new costs Project profitability for a new product. It can also be used to:. Start with your costs….

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Break-Even Analysis

Break-Even Analysis. Break-even Analysis – performed to determine the value of a variable that makes two elements equal. In economic terms: determining a parameter such that revenue equals cost . The study parameter might be: Production Volume Percentage of capacity Labor rate

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Break Even Analysis

Break Even Analysis. Presented by Francis Pinto 17 Shilpa Kulkarni 31 Pradnya Morje 36 Amol Rane 43 Tushar Wadivkar 57 Aditya Divadkar 58. Costs are of two types. Total cost = Variable cost + Fixed cost Variable cost Fixed cost Direct Common / indirect

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Break Even Analysis

Break Even Analysis. [ Chapter 9 ]. Objectives. Upon completion of this chapter students will be able to: Identify different type of costs. Define type of costs. Contribution Contribution and Variable Rate Understand break-even point Able to solve the chapter’s problems. Type of Costs.

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Break-Even Analysis

Break-Even Analysis. Terminology. Sales Revenue / Income – The amount of money a company takes from selling goods or services. Quantity sold x Sale price of each item Costs / Expenditure – The money that businesses spends while they trade. There are fixed, variable and total costs

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Break-Even Analysis

Break-Even Analysis. Study of interrelationships among a firm’s sales, costs, and operating profit at various levels of output Break-even point is the Q where TR = TC ( Q 1 to Q 2 on graph). $’s. TC. TR. Profit. Q. Q 1. Q 2. Linear Break-Even Analysis.

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BREAK EVEN ANALYSIS

BREAK EVEN ANALYSIS. Key Terminology. COSTS. The money that firms spend to make their products, or to run their business. Y-AXIS. The vertical axis on a chart/graph. REVENUE. The money firms get from providing a service, or selling products. CONTRIBUTION METHOD.

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Break Even Analysis

Break Even Analysis. Conduct A Breakeven Analysis. XYZ Nonprofit decides to use its existing kitchen space to open a pizza delivery business for corporate accounts. The standard price of a pizza with regular delivery is $13.00. Ingredients for one pizza are

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BREAK-EVEN ANALYSIS

BREAK-EVEN ANALYSIS. BREAK-EVEN ANALYSIS. P: Price. TR. = ( P )( Q ). $. P >0. TC. P <0. Total Fixed Cost. = TFC + ( AVC )( Q ). TFC. Quantity (Q). Q o. Q*. Q o. Break-Even Quantity. Profit ( P) = TR - TC. P: Price TFC: Total Fixed Cost. Example:. TFC. TFC = $10.000.

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Break-Even Analysis

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