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CvSU MANUAL OF OPERATIONS
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Following is the breakeven model that can be used in
determining the desired selling price and production/sales volume
that would help achieves the project’s objectives.
1. Breakeven Price (BEP) = Total Operating Expenses
Total Quantity Produced
This will give us the minimum selling price that we can offer to
at least breakeven. It means that a net income/profit will be realized if
we sell our products above this price, while a net loss will be incurred,
if sold below the price.
2. Breakeven Volume = Total Operating Expenses
Proposed Selling Price
This will help us determine the minimum production level that
should be produced and sold by the project to at least breakeven. It
means that production above this level will help the project realize a
net income. However, if production is below this level, a net loss will
be incurred.
If the project wou ld like to attain its target net income/profit in
a given production period, the following formulas will help guide the
Project Manager:
A. BEP to Attain Target Net Income
= Total Operating Expenses + Target Net Income
Total Quantity Produced
This will guide us on the projected price that we can offer to
attain our target net income in a given production period.
B. BEV to Attain Target Net Income
= Total Operating Expenses + Target Net Income
Proposed Selling Price
This will guide us on how much to produce and sell to attain
our target net income in a given production period.
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