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Chapter 3
Single product breakeven analysis
The breakeven point is the level of activity at which there is neither
profit, nor loss.
Assume that each unit sells for $200 and contributes $160 towards
covering fixed costs of $600,000:
Selling price per unit $200
Less: variable cost per unit ($40)
Contribution per unit $160
Total fixed costs $600,000
Profit ?
In order to breakeven, we need to cover our fixed costs. Here, the
breakeven point = Total fixed costs divided by the unit contribution:
$600,000/$160 = 3,750 units.
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