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    Lesson-5-Break-even Analysis

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    Bernadeth Montarde
    Lesson-5-Break-even Analysis

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    Lesson-5-Break-even Analysis

    Uploaded by

    Bernadeth Montarde
    1 views25 pages
    Lesson-5-Break-even Analysis

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    Lesson-5-Break-even Analysis

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    1 views25 pages

    Lesson-5-Break-even Analysis

    Uploaded by

    Bernadeth Montarde
    Lesson-5-Break-even Analysis

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 25

    LESSON 5 –

    BREAK-EVEN ANALYSIS
    BREAK-EVEN
    BREAK-EVEN POINT
    BREAK-EVEN CHART
    BREAK-EVEN ANALYSIS

    BREAK-EVEN ANALYSIS is a method for studying the


    relationships among sales revenue, fixed costs, and
    variable expenses to determine the minimum volume
    at which production can be profitable
    BREAK-EVEN ANALYSIS
    BREAK-EVEN ANALYSIS FORMULA
    BREAK-EVEN ANALYSIS FORMULA
    BREAK-EVEN ANALYSIS FORMULA
    MARGIN OF SAFETY
    MARGIN OF SAFETY

    MARGIN OF SAFETY - represents the amount of Sales which can still be decreased
    BREAK-EVEN VS MARGIN OF SAFETY
    ILLUSTRATIVE PROBLEM

    Black Panther Corporation has a marginal contribution of 40% of sales and


    fixed costs of ₱900,000 per year.

    Compute for the following:


    1. Break-even peso sales

    2. Net income expected on sales of ₱ 2,500,000

    3. The amount of sales required to produce income of ₱ 400,000 before tax

    4. The amount of sales, assuming a margin of safety ratio of 20%

    5. The sales revenue required to produce an income of 10% on sales


    SOLUTION

    1 Break-even Sales (Pesos) = Total Fixed Costs


    Unit Contribution Margin
    = ₱900,000.00 / 40%
    = ₱2,250,000.00

    2 Sales 2,500,000.00
    x Contribution Margin 40%
    Contribution 1,000,000.00 40%
    Less: Fixed Cost 900,000.00 36%
    Net Income ₱100,000.00 4%

    3 Sales ₱3,250,000.00 100%


    Variable Cost 1,950,000.00 60%
    Contribution 1,300,000.00 40%
    Less: Fixed Cost 900,000.00
    Net Income ₱ 400,000.00
    SOLUTION

    4 Sales = Break-even Sales


    1 - Margin of Safety Ratio
    = ₱2,250,000.00
    1-20%
    = ₱2,250,000.00 / 80%
    = ₱2,812,500.00

    5 Sales ₱3,000,000.00 100%


    Variable Cost 60%
    Contribution 40%
    Less: Fixed Cost 900,000.00 30%
    Net Income 10%
    SEAT WORK
    SOLUTION
    BREAK-EVEN ANALYSIS
    COST-VOLUME PROFIT ANALYSIS is a technique for the financial analysis of the relations
    between costs and profits under conditions of changing volume. This technique is used for
    measuring the functional relationships between the major factors affecting profits and for
    determining the profit structure of the firm.
    BREAK-EVEN ANALYSIS

    STANDARD COST VARIANCE ANALYSIS – are scientifically predetermined costs of producing


    a product or rendering a service under specified conditions

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