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BREAK EVEN ANALYSIS
Break-even Analysis
Break-even analysis, also known as cost-volume-profit
analysis, is simply a mathematical formula to determine
the sales level at which the firm neither incurs a loss nor
makes a profit.
It studies the relationship between sales volumes and
variable cost, fixed cost and profits.
A method used to determine the level of sales or total
sales value to be obtained in order to cover all operating
costs.
Break-even point (units) = Fixed Cost
Contribution margin per unit
Break-even point (RM) = Fixed Cost
Contribution margin / Sales ratio
If the company set the amount of profit targets to be
achieved, the formula for the break-even point is:
Target Profit + Fixed Cost
Selling price per unit - Variable cost per unit
