This document discusses break even analysis, which is used to determine the point at which a business neither makes a profit nor suffers a loss. It defines break even point as when total sales equal total costs or net income is zero. The document provides the formulas to calculate break even point in terms of unit sales and monetary sales. It also discusses operating, financial, and economic break even points. An example is given to demonstrate calculating break even point using information on selling price, variable costs, contribution margin, and fixed costs. Finally, the document lists some uses of break even point analysis.

1. Break Even
Analysis
Presented by:
Shivam Jhajj (Roll No. 05)

2. What is Break-even?
 Break even is that point where business neither
make any profit nor suffer any loss.
 Break even point can be defines as where
i. Total sales = Total cost
ii. Net income is equal to zero

3. Determination of Break Even Point
Break even Point
(in terms of unit sales)
(S-V is also known as Contribution margin per unit)
Where, F= Total Fixed Cost
S= Selling Price of each unit
V= Variable Cost per unit

4. Break even Point =
(in terms of monetary sales)
Where P/V ratio = Contribution margin per unit
Selling Price per unit

5. Break Even Analysis (C-V-P Analysis)
1. Operating Break Even Sales =
2. Financial Break Even =
3. Economic Break Even =

6. Assumptions
 All elements of cost can be divided into fixed and variable
costs.
 Variable costs remain constant per unit of output.
 Fixed cost remain constant at all volume of output.
 Selling price per unit remains unchanged or constant at all
levels of output.

7. Calculating the Break even Point
Example: Suppose a business manufactures pen.
Price: Rs 5
Variable Cost: - Rs 3 (price of plastic, refill etc.)
Contribution Margin: Rs 2 (per unit)
Fixed Cost: Rs 20,000
(Machinery, Insurance, Rent etc.)
Break Even Point: Fixed Cost = Rs 20,000 = 10,000 units
(in units) CM per unit Rs 2

9. USES OF BREAK EVEN POINT
• Helpful in deciding the minimum quantity of sales.
• Helpful in the determination of tender price.
• Helpful in examining effects upon organization’s
profitability.
• Helpful in calculating safety margin.
• Helpful in determining Break even sales quantity.

10. Thank You