SlideShare a Scribd company logo
A Presentation on Break-
Even Analysis and its
Importance for an
Industry
Introduction
 A breakeven analysis is used to determine how
much sales volume a business needs to start
making profit.
 The breakeven analysis is especially useful when
developing a pricing strategy, either as part of a
marketing plan or a business plan.
Break Even Analysis Calculation
 Fixed Cost: The sum of all costs required to produce the
first unit of a product. This amount does not vary as
production increases or decreases, until new capital
expenditures are needed.
 Variable cost: Costs that vary directly with the production
of one additional unit.
Break Even Analysis Calculation
 Expected unit sales: Number of units of the product
projected to be sold over a specific period of time.
 Unit Price: The amount of money charged to the customer
for each unit of a product or service. Selling price for
every unit of a product.
Break Even Analysis Calculation
 Total Variable cost: The product of expected unit sales
and variable unit cost.
(Expected Unit Sales * Variable Unit cost)
 Total Cost: The sum of the fixed cost and total variable
cost for any given level of production.
(Fixed Cost + Total Variable Cost)
Break Even Analysis Calculation
 Total Revenue: The product of expected unit sales and
unit price.
(Expected Unit Sales * Unit Price)
 Profit (or Loss): The monetary gain (or loss) resulting
from revenues after subtracting all associated costs.
(Total Revenue – Total Costs)
Break Even Point
 A break even point indicates at what
level cost and revenue are in
equilibrium.
 It is a point of indifference, where
losses cease to occur while profit
have not yet begun.
Importance of Break Even Analysis
for an Industry
It helps in determining
The optimum level of output.
Minimum cost for a given level of output.
Selling price for a product.
Importance of Break Even Analysis
for an Industry
It helps in determining
The target capacity of an industry to get the benefit of
minimum per unit production cost.
Establishing the point from where the industry can start
paying dividend to share holders.
Importance of Break Even Analysis
for an Industry
It helps in analyzing
Impact of new product launch.
Impact of purchasing new capital equipment.
Should one make, buy or lease capital equipment.
Importance of Break Even Analysis
for an Industry
It helps in analyzing
Revenue and cost implications of changing the process of
production.
Impact of changes in price and cost on profit of the
industry.
THANK YOUTHANK YOU

More Related Content

What's hot

BREAK-EVEN ANALYSIS
BREAK-EVEN ANALYSISBREAK-EVEN ANALYSIS
BREAK-EVEN ANALYSIS
Asrar Mohd
 
Process costing
Process costingProcess costing
Process costing
Prem Chand
 
Marginal Costing & Profit Planning
Marginal Costing & Profit PlanningMarginal Costing & Profit Planning
Marginal Costing & Profit Planning
Dr. Trilok Kumar Jain
 
Fixed, variable and Incremental Cost
Fixed, variable and Incremental CostFixed, variable and Incremental Cost
Fixed, variable and Incremental Cost
Rahat Inayat Ali
 
Presentation on cost
Presentation on costPresentation on cost
Presentation on cost
Aashish Chandel
 
Make or Buy Decisions
Make or Buy DecisionsMake or Buy Decisions
Make or Buy Decisions
Ron McFarland
 
marginal and absorption costing
marginal and absorption costingmarginal and absorption costing
marginal and absorption costing
sangeeta saini
 
Process costing
Process costingProcess costing
Process costing
grvthakkar
 
Break Even Analysis
Break Even AnalysisBreak Even Analysis
Break Even Analysis
yogesh raghuwanshi
 
Methods and techniques of Costing
Methods and techniques of CostingMethods and techniques of Costing
Methods and techniques of Costing
Ashwin Showi
 
MG 6863 UNIT II MAKE OR BUY DECISION
MG 6863 UNIT II MAKE OR BUY DECISIONMG 6863 UNIT II MAKE OR BUY DECISION
MG 6863 UNIT II MAKE OR BUY DECISION
Asha A
 
BREAK EVEN ANALYSIS GRAPH WITH EXPLANATION
BREAK EVEN ANALYSIS GRAPH WITH EXPLANATIONBREAK EVEN ANALYSIS GRAPH WITH EXPLANATION
BREAK EVEN ANALYSIS GRAPH WITH EXPLANATION
Navya Jayakumar
 
Break Even Analysis
Break Even AnalysisBreak Even Analysis
Break Even Analysis
Nikhil Das
 
production function with 2 variable inputs return to scale
production function with 2 variable inputs return to scaleproduction function with 2 variable inputs return to scale
production function with 2 variable inputs return to scale
Nabil Ashraf
 
Unit or output costing i
Unit or output costing iUnit or output costing i
Unit or output costing i
Gunjan Dhir
 
Cost accounting bba 3rd
Cost accounting bba 3rdCost accounting bba 3rd
Cost accounting bba 3rd
ahsanullah mohsen
 
MODI Method (Operations Research)
MODI Method (Operations Research) MODI Method (Operations Research)
MODI Method (Operations Research)
Nilraj Vasandia
 
Tools and techniques of cost reduction
Tools and techniques of cost reductionTools and techniques of cost reduction
Tools and techniques of cost reduction
Dhirendra Kumar Chaudhary
 
Cost Output Relationship; Estimation of Cost and Output
Cost Output Relationship; Estimation of Cost and OutputCost Output Relationship; Estimation of Cost and Output
Cost Output Relationship; Estimation of Cost and Output
Dheeraj Rajput
 
applications of marginal costing
applications of marginal costingapplications of marginal costing
applications of marginal costing
Arif S
 

What's hot (20)

BREAK-EVEN ANALYSIS
BREAK-EVEN ANALYSISBREAK-EVEN ANALYSIS
BREAK-EVEN ANALYSIS
 
Process costing
Process costingProcess costing
Process costing
 
Marginal Costing & Profit Planning
Marginal Costing & Profit PlanningMarginal Costing & Profit Planning
Marginal Costing & Profit Planning
 
Fixed, variable and Incremental Cost
Fixed, variable and Incremental CostFixed, variable and Incremental Cost
Fixed, variable and Incremental Cost
 
Presentation on cost
Presentation on costPresentation on cost
Presentation on cost
 
Make or Buy Decisions
Make or Buy DecisionsMake or Buy Decisions
Make or Buy Decisions
 
marginal and absorption costing
marginal and absorption costingmarginal and absorption costing
marginal and absorption costing
 
Process costing
Process costingProcess costing
Process costing
 
Break Even Analysis
Break Even AnalysisBreak Even Analysis
Break Even Analysis
 
Methods and techniques of Costing
Methods and techniques of CostingMethods and techniques of Costing
Methods and techniques of Costing
 
MG 6863 UNIT II MAKE OR BUY DECISION
MG 6863 UNIT II MAKE OR BUY DECISIONMG 6863 UNIT II MAKE OR BUY DECISION
MG 6863 UNIT II MAKE OR BUY DECISION
 
BREAK EVEN ANALYSIS GRAPH WITH EXPLANATION
BREAK EVEN ANALYSIS GRAPH WITH EXPLANATIONBREAK EVEN ANALYSIS GRAPH WITH EXPLANATION
BREAK EVEN ANALYSIS GRAPH WITH EXPLANATION
 
Break Even Analysis
Break Even AnalysisBreak Even Analysis
Break Even Analysis
 
production function with 2 variable inputs return to scale
production function with 2 variable inputs return to scaleproduction function with 2 variable inputs return to scale
production function with 2 variable inputs return to scale
 
Unit or output costing i
Unit or output costing iUnit or output costing i
Unit or output costing i
 
Cost accounting bba 3rd
Cost accounting bba 3rdCost accounting bba 3rd
Cost accounting bba 3rd
 
MODI Method (Operations Research)
MODI Method (Operations Research) MODI Method (Operations Research)
MODI Method (Operations Research)
 
Tools and techniques of cost reduction
Tools and techniques of cost reductionTools and techniques of cost reduction
Tools and techniques of cost reduction
 
Cost Output Relationship; Estimation of Cost and Output
Cost Output Relationship; Estimation of Cost and OutputCost Output Relationship; Estimation of Cost and Output
Cost Output Relationship; Estimation of Cost and Output
 
applications of marginal costing
applications of marginal costingapplications of marginal costing
applications of marginal costing
 

Similar to A presentation on break even analysis and its importance for an industry

break even analysis
break even analysisbreak even analysis
break even analysis
silveroak engineering collage
 
Break-even Analysis
Break-even AnalysisBreak-even Analysis
Break-even Analysis
Alka Srivastava
 
Break even analysis by aman u mahbub
Break even analysis by aman u mahbubBreak even analysis by aman u mahbub
Break even analysis by aman u mahbub
Aman U Mahbub
 
Break even analysis by aman u mahbub
Break even analysis by aman u mahbubBreak even analysis by aman u mahbub
Break even analysis by aman u mahbub
Aman U Mahbub
 
Break even analysis
Break even analysisBreak even analysis
Break even analysis
shubham mandloi
 
BREAKEVEN POINT.pptx
BREAKEVEN POINT.pptxBREAKEVEN POINT.pptx
BREAKEVEN POINT.pptx
Bishal Saha
 
Break even analysis
Break even analysisBreak even analysis
Break even analysis
tigerjayadev
 
Ppt12
Ppt12Ppt12
Ppt12
Ppt12Ppt12
EEM 130120119126
EEM 130120119126EEM 130120119126
EEM 130120119126
Pandya Kartik
 
Theoryofcost
TheoryofcostTheoryofcost
Theoryofcost
Conferat Conferat
 
breakeven analikysis
breakeven analikysis breakeven analikysis
breakeven analikysis
Alka Srivastava
 
Presentation on CVP Analysis, Break Even Point & Applications of Marginal Cos...
Presentation on CVP Analysis, Break Even Point & Applications of Marginal Cos...Presentation on CVP Analysis, Break Even Point & Applications of Marginal Cos...
Presentation on CVP Analysis, Break Even Point & Applications of Marginal Cos...
Leena Kakkar
 
Cost volume profit analysis
Cost volume profit analysisCost volume profit analysis
Cost volume profit analysis
Nazar Mohammed
 
UNIT 2 BUSINESS ECONOMICS PPT.pptx
UNIT 2 BUSINESS ECONOMICS PPT.pptxUNIT 2 BUSINESS ECONOMICS PPT.pptx
UNIT 2 BUSINESS ECONOMICS PPT.pptx
AshishPrabakaran
 
Marginal costing
Marginal costingMarginal costing
Marginal costing
Dr. Sushil Bansode
 
SAIDEEPMUKHOPADHYAY_IT_11200222017.pptx
SAIDEEPMUKHOPADHYAY_IT_11200222017.pptxSAIDEEPMUKHOPADHYAY_IT_11200222017.pptx
SAIDEEPMUKHOPADHYAY_IT_11200222017.pptx
ITSaideepMukhopadhya
 
Marginal cost & cost sheet ppt 1
Marginal cost & cost sheet ppt  1Marginal cost & cost sheet ppt  1
Marginal cost & cost sheet ppt 1
Vinod Panchal
 
4 marginal cost
4 marginal cost4 marginal cost
4 marginal cost
Astha Borthakur
 
economics ppt for btech and basic introduction to engineering
economics ppt for btech and basic introduction to engineeringeconomics ppt for btech and basic introduction to engineering
economics ppt for btech and basic introduction to engineering
CITDiplomaMadhyamgra
 

Similar to A presentation on break even analysis and its importance for an industry (20)

break even analysis
break even analysisbreak even analysis
break even analysis
 
Break-even Analysis
Break-even AnalysisBreak-even Analysis
Break-even Analysis
 
Break even analysis by aman u mahbub
Break even analysis by aman u mahbubBreak even analysis by aman u mahbub
Break even analysis by aman u mahbub
 
Break even analysis by aman u mahbub
Break even analysis by aman u mahbubBreak even analysis by aman u mahbub
Break even analysis by aman u mahbub
 
Break even analysis
Break even analysisBreak even analysis
Break even analysis
 
BREAKEVEN POINT.pptx
BREAKEVEN POINT.pptxBREAKEVEN POINT.pptx
BREAKEVEN POINT.pptx
 
Break even analysis
Break even analysisBreak even analysis
Break even analysis
 
Ppt12
Ppt12Ppt12
Ppt12
 
Ppt12
Ppt12Ppt12
Ppt12
 
EEM 130120119126
EEM 130120119126EEM 130120119126
EEM 130120119126
 
Theoryofcost
TheoryofcostTheoryofcost
Theoryofcost
 
breakeven analikysis
breakeven analikysis breakeven analikysis
breakeven analikysis
 
Presentation on CVP Analysis, Break Even Point & Applications of Marginal Cos...
Presentation on CVP Analysis, Break Even Point & Applications of Marginal Cos...Presentation on CVP Analysis, Break Even Point & Applications of Marginal Cos...
Presentation on CVP Analysis, Break Even Point & Applications of Marginal Cos...
 
Cost volume profit analysis
Cost volume profit analysisCost volume profit analysis
Cost volume profit analysis
 
UNIT 2 BUSINESS ECONOMICS PPT.pptx
UNIT 2 BUSINESS ECONOMICS PPT.pptxUNIT 2 BUSINESS ECONOMICS PPT.pptx
UNIT 2 BUSINESS ECONOMICS PPT.pptx
 
Marginal costing
Marginal costingMarginal costing
Marginal costing
 
SAIDEEPMUKHOPADHYAY_IT_11200222017.pptx
SAIDEEPMUKHOPADHYAY_IT_11200222017.pptxSAIDEEPMUKHOPADHYAY_IT_11200222017.pptx
SAIDEEPMUKHOPADHYAY_IT_11200222017.pptx
 
Marginal cost & cost sheet ppt 1
Marginal cost & cost sheet ppt  1Marginal cost & cost sheet ppt  1
Marginal cost & cost sheet ppt 1
 
4 marginal cost
4 marginal cost4 marginal cost
4 marginal cost
 
economics ppt for btech and basic introduction to engineering
economics ppt for btech and basic introduction to engineeringeconomics ppt for btech and basic introduction to engineering
economics ppt for btech and basic introduction to engineering
 

Recently uploaded

Generative AI Use cases applications solutions and implementation.pdf
Generative AI Use cases applications solutions and implementation.pdfGenerative AI Use cases applications solutions and implementation.pdf
Generative AI Use cases applications solutions and implementation.pdf
mahaffeycheryld
 
一比一原版(CalArts毕业证)加利福尼亚艺术学院毕业证如何办理
一比一原版(CalArts毕业证)加利福尼亚艺术学院毕业证如何办理一比一原版(CalArts毕业证)加利福尼亚艺术学院毕业证如何办理
一比一原版(CalArts毕业证)加利福尼亚艺术学院毕业证如何办理
ecqow
 
AI-Based Home Security System : Home security
AI-Based Home Security System : Home securityAI-Based Home Security System : Home security
AI-Based Home Security System : Home security
AIRCC Publishing Corporation
 
Blood finder application project report (1).pdf
Blood finder application project report (1).pdfBlood finder application project report (1).pdf
Blood finder application project report (1).pdf
Kamal Acharya
 
Open Channel Flow: fluid flow with a free surface
Open Channel Flow: fluid flow with a free surfaceOpen Channel Flow: fluid flow with a free surface
Open Channel Flow: fluid flow with a free surface
Indrajeet sahu
 
一比一原版(爱大毕业证书)爱荷华大学毕业证如何办理
一比一原版(爱大毕业证书)爱荷华大学毕业证如何办理一比一原版(爱大毕业证书)爱荷华大学毕业证如何办理
一比一原版(爱大毕业证书)爱荷华大学毕业证如何办理
nedcocy
 
Null Bangalore | Pentesters Approach to AWS IAM
Null Bangalore | Pentesters Approach to AWS IAMNull Bangalore | Pentesters Approach to AWS IAM
Null Bangalore | Pentesters Approach to AWS IAM
Divyanshu
 
LLM Fine Tuning with QLoRA Cassandra Lunch 4, presented by Anant
LLM Fine Tuning with QLoRA Cassandra Lunch 4, presented by AnantLLM Fine Tuning with QLoRA Cassandra Lunch 4, presented by Anant
LLM Fine Tuning with QLoRA Cassandra Lunch 4, presented by Anant
Anant Corporation
 
SENTIMENT ANALYSIS ON PPT AND Project template_.pptx
SENTIMENT ANALYSIS ON PPT AND Project template_.pptxSENTIMENT ANALYSIS ON PPT AND Project template_.pptx
SENTIMENT ANALYSIS ON PPT AND Project template_.pptx
b0754201
 
UNIT 4 LINEAR INTEGRATED CIRCUITS-DIGITAL ICS
UNIT 4 LINEAR INTEGRATED CIRCUITS-DIGITAL ICSUNIT 4 LINEAR INTEGRATED CIRCUITS-DIGITAL ICS
UNIT 4 LINEAR INTEGRATED CIRCUITS-DIGITAL ICS
vmspraneeth
 
P5 Working Drawings.pdf floor plan, civil
P5 Working Drawings.pdf floor plan, civilP5 Working Drawings.pdf floor plan, civil
P5 Working Drawings.pdf floor plan, civil
AnasAhmadNoor
 
Data Driven Maintenance | UReason Webinar
Data Driven Maintenance | UReason WebinarData Driven Maintenance | UReason Webinar
Data Driven Maintenance | UReason Webinar
UReason
 
SCALING OF MOS CIRCUITS m .pptx
SCALING OF MOS CIRCUITS m                 .pptxSCALING OF MOS CIRCUITS m                 .pptx
SCALING OF MOS CIRCUITS m .pptx
harshapolam10
 
Optimizing Gradle Builds - Gradle DPE Tour Berlin 2024
Optimizing Gradle Builds - Gradle DPE Tour Berlin 2024Optimizing Gradle Builds - Gradle DPE Tour Berlin 2024
Optimizing Gradle Builds - Gradle DPE Tour Berlin 2024
Sinan KOZAK
 
Software Engineering and Project Management - Introduction, Modeling Concepts...
Software Engineering and Project Management - Introduction, Modeling Concepts...Software Engineering and Project Management - Introduction, Modeling Concepts...
Software Engineering and Project Management - Introduction, Modeling Concepts...
Prakhyath Rai
 
Zener Diode and its V-I Characteristics and Applications
Zener Diode and its V-I Characteristics and ApplicationsZener Diode and its V-I Characteristics and Applications
Zener Diode and its V-I Characteristics and Applications
Shiny Christobel
 
一比一原版(uoft毕业证书)加拿大多伦多大学毕业证如何办理
一比一原版(uoft毕业证书)加拿大多伦多大学毕业证如何办理一比一原版(uoft毕业证书)加拿大多伦多大学毕业证如何办理
一比一原版(uoft毕业证书)加拿大多伦多大学毕业证如何办理
sydezfe
 
Digital Twins Computer Networking Paper Presentation.pptx
Digital Twins Computer Networking Paper Presentation.pptxDigital Twins Computer Networking Paper Presentation.pptx
Digital Twins Computer Networking Paper Presentation.pptx
aryanpankaj78
 
2. protection of river banks and bed erosion protection works.ppt
2. protection of river banks and bed erosion protection works.ppt2. protection of river banks and bed erosion protection works.ppt
2. protection of river banks and bed erosion protection works.ppt
abdatawakjira
 
Software Engineering and Project Management - Software Testing + Agile Method...
Software Engineering and Project Management - Software Testing + Agile Method...Software Engineering and Project Management - Software Testing + Agile Method...
Software Engineering and Project Management - Software Testing + Agile Method...
Prakhyath Rai
 

Recently uploaded (20)

Generative AI Use cases applications solutions and implementation.pdf
Generative AI Use cases applications solutions and implementation.pdfGenerative AI Use cases applications solutions and implementation.pdf
Generative AI Use cases applications solutions and implementation.pdf
 
一比一原版(CalArts毕业证)加利福尼亚艺术学院毕业证如何办理
一比一原版(CalArts毕业证)加利福尼亚艺术学院毕业证如何办理一比一原版(CalArts毕业证)加利福尼亚艺术学院毕业证如何办理
一比一原版(CalArts毕业证)加利福尼亚艺术学院毕业证如何办理
 
AI-Based Home Security System : Home security
AI-Based Home Security System : Home securityAI-Based Home Security System : Home security
AI-Based Home Security System : Home security
 
Blood finder application project report (1).pdf
Blood finder application project report (1).pdfBlood finder application project report (1).pdf
Blood finder application project report (1).pdf
 
Open Channel Flow: fluid flow with a free surface
Open Channel Flow: fluid flow with a free surfaceOpen Channel Flow: fluid flow with a free surface
Open Channel Flow: fluid flow with a free surface
 
一比一原版(爱大毕业证书)爱荷华大学毕业证如何办理
一比一原版(爱大毕业证书)爱荷华大学毕业证如何办理一比一原版(爱大毕业证书)爱荷华大学毕业证如何办理
一比一原版(爱大毕业证书)爱荷华大学毕业证如何办理
 
Null Bangalore | Pentesters Approach to AWS IAM
Null Bangalore | Pentesters Approach to AWS IAMNull Bangalore | Pentesters Approach to AWS IAM
Null Bangalore | Pentesters Approach to AWS IAM
 
LLM Fine Tuning with QLoRA Cassandra Lunch 4, presented by Anant
LLM Fine Tuning with QLoRA Cassandra Lunch 4, presented by AnantLLM Fine Tuning with QLoRA Cassandra Lunch 4, presented by Anant
LLM Fine Tuning with QLoRA Cassandra Lunch 4, presented by Anant
 
SENTIMENT ANALYSIS ON PPT AND Project template_.pptx
SENTIMENT ANALYSIS ON PPT AND Project template_.pptxSENTIMENT ANALYSIS ON PPT AND Project template_.pptx
SENTIMENT ANALYSIS ON PPT AND Project template_.pptx
 
UNIT 4 LINEAR INTEGRATED CIRCUITS-DIGITAL ICS
UNIT 4 LINEAR INTEGRATED CIRCUITS-DIGITAL ICSUNIT 4 LINEAR INTEGRATED CIRCUITS-DIGITAL ICS
UNIT 4 LINEAR INTEGRATED CIRCUITS-DIGITAL ICS
 
P5 Working Drawings.pdf floor plan, civil
P5 Working Drawings.pdf floor plan, civilP5 Working Drawings.pdf floor plan, civil
P5 Working Drawings.pdf floor plan, civil
 
Data Driven Maintenance | UReason Webinar
Data Driven Maintenance | UReason WebinarData Driven Maintenance | UReason Webinar
Data Driven Maintenance | UReason Webinar
 
SCALING OF MOS CIRCUITS m .pptx
SCALING OF MOS CIRCUITS m                 .pptxSCALING OF MOS CIRCUITS m                 .pptx
SCALING OF MOS CIRCUITS m .pptx
 
Optimizing Gradle Builds - Gradle DPE Tour Berlin 2024
Optimizing Gradle Builds - Gradle DPE Tour Berlin 2024Optimizing Gradle Builds - Gradle DPE Tour Berlin 2024
Optimizing Gradle Builds - Gradle DPE Tour Berlin 2024
 
Software Engineering and Project Management - Introduction, Modeling Concepts...
Software Engineering and Project Management - Introduction, Modeling Concepts...Software Engineering and Project Management - Introduction, Modeling Concepts...
Software Engineering and Project Management - Introduction, Modeling Concepts...
 
Zener Diode and its V-I Characteristics and Applications
Zener Diode and its V-I Characteristics and ApplicationsZener Diode and its V-I Characteristics and Applications
Zener Diode and its V-I Characteristics and Applications
 
一比一原版(uoft毕业证书)加拿大多伦多大学毕业证如何办理
一比一原版(uoft毕业证书)加拿大多伦多大学毕业证如何办理一比一原版(uoft毕业证书)加拿大多伦多大学毕业证如何办理
一比一原版(uoft毕业证书)加拿大多伦多大学毕业证如何办理
 
Digital Twins Computer Networking Paper Presentation.pptx
Digital Twins Computer Networking Paper Presentation.pptxDigital Twins Computer Networking Paper Presentation.pptx
Digital Twins Computer Networking Paper Presentation.pptx
 
2. protection of river banks and bed erosion protection works.ppt
2. protection of river banks and bed erosion protection works.ppt2. protection of river banks and bed erosion protection works.ppt
2. protection of river banks and bed erosion protection works.ppt
 
Software Engineering and Project Management - Software Testing + Agile Method...
Software Engineering and Project Management - Software Testing + Agile Method...Software Engineering and Project Management - Software Testing + Agile Method...
Software Engineering and Project Management - Software Testing + Agile Method...
 

A presentation on break even analysis and its importance for an industry

  • 1. A Presentation on Break- Even Analysis and its Importance for an Industry
  • 2. Introduction  A breakeven analysis is used to determine how much sales volume a business needs to start making profit.  The breakeven analysis is especially useful when developing a pricing strategy, either as part of a marketing plan or a business plan.
  • 3. Break Even Analysis Calculation  Fixed Cost: The sum of all costs required to produce the first unit of a product. This amount does not vary as production increases or decreases, until new capital expenditures are needed.  Variable cost: Costs that vary directly with the production of one additional unit.
  • 4. Break Even Analysis Calculation  Expected unit sales: Number of units of the product projected to be sold over a specific period of time.  Unit Price: The amount of money charged to the customer for each unit of a product or service. Selling price for every unit of a product.
  • 5. Break Even Analysis Calculation  Total Variable cost: The product of expected unit sales and variable unit cost. (Expected Unit Sales * Variable Unit cost)  Total Cost: The sum of the fixed cost and total variable cost for any given level of production. (Fixed Cost + Total Variable Cost)
  • 6. Break Even Analysis Calculation  Total Revenue: The product of expected unit sales and unit price. (Expected Unit Sales * Unit Price)  Profit (or Loss): The monetary gain (or loss) resulting from revenues after subtracting all associated costs. (Total Revenue – Total Costs)
  • 7. Break Even Point  A break even point indicates at what level cost and revenue are in equilibrium.  It is a point of indifference, where losses cease to occur while profit have not yet begun.
  • 8. Importance of Break Even Analysis for an Industry It helps in determining The optimum level of output. Minimum cost for a given level of output. Selling price for a product.
  • 9. Importance of Break Even Analysis for an Industry It helps in determining The target capacity of an industry to get the benefit of minimum per unit production cost. Establishing the point from where the industry can start paying dividend to share holders.
  • 10. Importance of Break Even Analysis for an Industry It helps in analyzing Impact of new product launch. Impact of purchasing new capital equipment. Should one make, buy or lease capital equipment.
  • 11. Importance of Break Even Analysis for an Industry It helps in analyzing Revenue and cost implications of changing the process of production. Impact of changes in price and cost on profit of the industry.