useful for mcom & bba students

1. Break Even Analysis
Dr. Kshitija Gandhi
PHD, MPHIL, MCOM,MBA,UGC NET
Vice Principal
Pratibha College of
Commerce and Computer studies

2. Illustration
• A Company is manufacturing toys for the
kids. Manufacturing cost per toy is Rs. 30.
Fixed cost is Rs. 5000 Company received
order from party for 1000 toys. The selling
price of a toy is Rs. 50 per toy. The party
expects per toy for Rs. 35
• What should be company's decision
whether to accept the order or reject the
order

3. Manav is the owner of a
company .He
starts calculating
the cost
• Selling price Rs. 35*1000= 35000
• Variable Cost Rs. 30*1000=
30000
• Fixed Cost
Rs. 5000
• Total Revenue = Total Cost
• Manav accepts the order
• Is he getting profit?
No
• Is he suffering the loss?
No

4. Break Even Point
Manav is a businessman.
He realised that there is no profit
no loss.
He is selling at BEP point where
there is no profit or no loss
????????
There will be
• Increase in production of units​
• Decrease in Fixed cost​
• Increase in Consumers​
• Increase in Demand
• No Profit in monetary terms but can expect benefits in
future.

5. What is BEP
Break-even point (BEP) is a term in accounting that
refers to the situation where a company’s revenues
and expenses were equal
BEP may also refer to the revenues that are needed
to be reached in order to compensate for the
expenses incurred during a specific period.

6. How to
calculate BEP
There are a few
basic formulas
for determining
a break-even
point.
One is based
on the number
of units of
product sold
The other is
based on
points in sales
Rupees

7. How to
calculate BEP
There are a few
basic formulas
for determining
a break-even
point.
•Break-Even Point (Units) =
Fixed Costs ÷ Contribution per unit
(Revenue per Unit – Variable Cost per Unit)
•Break-Even Point (Rs.) =
Fixed Costs / Profit Volume Ratio

8. Fixed Costs Variable Costs
General
Labor
1,5000 Flour 25
Rent 1,0000 sugar 10
Insurance 2000 Milk 5
Advertising 5000 Cheese 10
Utitilies 3000
Cream
& butter
30
Total 35000 Total 80
Cake & Cream shop
is producing cakes.
The variable cost for a
cake is Rs. 80. Selling
Price of a cake is 150
How many cakes to be
produced to earn profit

9. Selling Price Rs.250
Variable Cost Rs. 80
Contribution Rs. 70
It shows that Rs. 70 is contributed to
cover fixed cost which is Rs. 35000
So to cover full Fixed Cost 35000/70
=500 cakes must be sold in a month.
So 500 cakes is BEP.
If you sell more than 500 cakes then
the owner can earn profit.
If he sold below 500 cakes then it will
be a loss to him.

10. Application of BEP
•To determine the selling Price
•Maintain desired level of Material
•Launching of New product
•Planning
•Goal setting

11. THANK YOU