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    Chapter 2 DPB20053

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    F2020 ADRIANA
    This document discusses break-even analysis. It defines break-even point as the point where there is no profit or loss. The break-even point is calculated as the point where total costs equal total revenue. The document outlines how to calculate break-even point using algebra by determining contribution margin and contribution margin ratio. It also discusses how to represent and calculate break-even graphically using total cost and total revenue graphs. Sample problems are provided to demonstrate calculating break-even points from given cost and revenue data and interpreting break-even analysis graphs.

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    Chapter 2 DPB20053

    Uploaded by

    F2020 ADRIANA
    23 views13 pages
    This document discusses break-even analysis. It defines break-even point as the point where there is no profit or loss. The break-even point is calculated as the point where total costs equal total revenue. The document outlines how to calculate break-even point using algebra by determining contribution margin and contribution margin ratio. It also discusses how to represent and calculate break-even graphically using total cost and total revenue graphs. Sample problems are provided to demonstrate calculating break-even points from given cost and revenue data and interpreting break-even analysis graphs.

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    This document discusses break-even analysis. It defines break-even point as the point where there is no profit or loss. The break-even point is calculated as the point where total costs equal total revenue. The document outlines how to calculate break-even point using algebra by determining contribution margin and contribution margin ratio. It also discusses how to represent and calculate break-even graphically using total cost and total revenue graphs. Sample problems are provided to demonstrate calculating break-even points from given cost and revenue data and interpreting break-even analysis graphs.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    23 views13 pages

    Chapter 2 DPB20053

    Uploaded by

    F2020 ADRIANA
    This document discusses break-even analysis. It defines break-even point as the point where there is no profit or loss. The break-even point is calculated as the point where total costs equal total revenue. The document outlines how to calculate break-even point using algebra by determining contribution margin and contribution margin ratio. It also discusses how to represent and calculate break-even graphically using total cost and total revenue graphs. Sample problems are provided to demonstrate calculating break-even points from given cost and revenue data and interpreting break-even analysis graphs.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 13

    CHAPTER 2:

    BREAK-EVEN ANALYSIS
    Introduction
     Break-even point (BEP) is a point where an investor or a businessman does not make any profit or
    loss.
     The BEP is the point at which cost or expenses and revenue are equal; there is no net loss or gain.
     This point is important to determine the lowest price of a product.

    2
    Break-even Point Analysis
     Two common functions of calculating the break-even point are to:
    - Plan and control costs with respect to sales
    - Measure and monitor sales performance
     The analysis of break-even point has the following limitations:
    - All the fixed costs are constants.
    - The variable cost per unit is a constant.
    - Total Cost = Fixed Costs + Variable Costs
    - No changes in efficiency and productivity of the operation
    - The costs only depend on production quantity or sales volume

    3
    Analysing BEP Using Algebra
    The contribution margin ratio (CMR)
    Contribution margin (CM) is the indicates the percentage of sales available to
    amount generated by sales to cover cover fixed costs and contributes towards
    fixed costs profit

    Contribution Margin (CM) Contribution Margin Ratio


    = Selling price – Variable costs = (Selling price – Variable costs) x 100
    P
    CM = p - vc
    CMR = p – VC x 100
    p

    4
    Analysing BEP Using Algebra
    A break even point may be expressed in
    terms of quantity or value of sales. (b) Break-even point in value (RM)

    (a) Break-even point in quantity (units) BEP (RM)


    BEP (units) = FC
    = FC p – VC
    p - VC p
    @ @

    = FC = BEP (units) x price


    CM

    5
    Question 1
    The following information was provided by CELTECH Sdn Bhd for the production of a
    product for the year ended 30/12/2019.

    Sales volume (units) = 30,000


    Price per unit = RM9.30
    Variable cost per unit = RM5.30
    Annual Fixed Cost = RM100,000

    Calculate:
    a. The profit made in that year.
    b. The BEP in units and RM
    c. The units need to be sold to get profit of RM40000
    d. The profit when the units sold is equal to BEP units

    6
    Question 1
    The following information was provided by CELTECH Sdn Bhd for the production of a
    product for the year ended 30/12/2019.

    Sales volume (units) = 30,000


    Price per unit = RM9.30
    Variable cost per unit = RM5.30
    Annual Fixed Cost = RM100,000

    Calculate:
    a. The profit made in that year.
    profit = TR - TC
    = pq – (FC + VCq)
    = 9.30 (30,000) – [(100,000 + 5.30(30,000)]
    = 279,000-100,000-159,000
    = RM20,000

    7
    Question 2
    ABC Sdn Bhd plans to produce rattan base product. The following information is
    obtained:

    Total sales volume = 10000units


    Price per unit = RM15.00
    Variable cost = RM8.50
    Fixed cost = RM80000
    Profit = RM100000

    Calculate:
    a. The quantity and value of the BEP
    b. The profit gained by the company
    c. The Contribution Margin Ratio
    d. The profit if selling price increased 20%

    8
    Break – Even Point Using Graph
    Beside using formulae or calculation, the break-even point can be determine using
    graph:
    a. Break-even point is the intersection point of the graphs for total revenue and
    total cost
    b. Quantity for break-even point is read off from the x-axis
    c. Value for break-even point is read off from the y-axis
    d. The area above the break-even point is called the profit area
    e. The area below the break-even point is called the loss area

    9
    GRAPH

    10
    Question 2
    The following data was obtained from a blouse outlet in Penang

    Price per unit : RM35.00


    Variable cost of 100 units : RM1200.00
    Fixed cost : RM80000.00

    Based on the data provided:


    a. Specify the total cost C(x), total revenue and profit function of the company.
    b. Construct a table for graphs and show the break-even point (quantity and value)
    c. Shade the profit and loss areas
    d. Find the profit (loss) if 3000 and 8000 units are sold

    11
    Question 1
    The following data is obtained from a factory in Penang

    Price per unit : RM25


    Variable cost of 100 units : RM800
    Fixed cost : RM200000

    Based on the data provided above, state:


    a. The total cost function, C(x) of the company
    b. The total revenue function, P(x)
    c. The profit function, P (x)
    d. Draw the straight line graphs and estimate the breakeven point (quantity and value)
    e. Shade the profit and loss area on the graph
    f. Profit (loss) if:
    i. 20000 units sold
    ii. 5000 units sold

    12
    Thanks!
    Any questions?

    13

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