Page 305 - SBL Integrated Workbook STUDENT 2018
P. 305
Financial decision making
Break-even analysis
3.1 The break-even point
This is the point at which profits (or losses) are zero.
Total fixed costs Total fixed costs will include both
Break-even units =
Contribution per unit production and sales costs.
Or
Total fixed costs Use this when we need the
Break-even revenue =
Contribution ratio break-even point in $.
Target profit
If, rather than simply break-even, the organisation has a target level of profit to
achieve, this target profit is added to the fixed costs in the formulae above.
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