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    Break Even Examples

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    John Kyle Tom Ramirez
    This document discusses break-even analysis, which is a method to determine when costs equal revenue. It provides the formula to calculate the break-even point and graphically represents it. It then gives three examples of using break-even analysis to determine the number of units needed to be produced or sold for a company to break even given fixed costs, variable costs, selling price, and production capacity.

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    Break Even Examples

    Uploaded by

    John Kyle Tom Ramirez
    16 views7 pages
    This document discusses break-even analysis, which is a method to determine when costs equal revenue. It provides the formula to calculate the break-even point and graphically represents it. It then gives three examples of using break-even analysis to determine the number of units needed to be produced or sold for a company to break even given fixed costs, variable costs, selling price, and production capacity.

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    BREAK EVEN EXAMPLES

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    This document discusses break-even analysis, which is a method to determine when costs equal revenue. It provides the formula to calculate the break-even point and graphically represents it. It then gives three examples of using break-even analysis to determine the number of units needed to be produced or sold for a company to break even given fixed costs, variable costs, selling price, and production capacity.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    16 views7 pages

    Break Even Examples

    Uploaded by

    John Kyle Tom Ramirez
    This document discusses break-even analysis, which is a method to determine when costs equal revenue. It provides the formula to calculate the break-even point and graphically represents it. It then gives three examples of using break-even analysis to determine the number of units needed to be produced or sold for a company to break even given fixed costs, variable costs, selling price, and production capacity.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 7

    BREAK-EVEN ANALYSIS

    BREAK EVEN ANALYSIS


    A method of determining when costs exactly equal revenue. At break even, the
    company is neither gaining nor losing profit,

    𝒇
    𝑵=
    𝒑−𝒂
    Where:
    𝑓 = 𝑓𝑖𝑥𝑒𝑑 𝑐𝑜𝑠𝑡
    . 𝑹 = 𝒑𝑵 a = variable cost, marginal cost
    p = selling price per unit
    N = quantity produced per unit
    . R = Revenue
    𝑪 = 𝒇 + 𝒂N C = Cost

    At break-even point,

    𝑪𝒐𝒔𝒕 = 𝑹evenue

    2023 ENGINEERING ECONOMY 2


    GRAPHICAL REPRESENTATION OF THE BREAK-EVEN POINT

    2023 ENGINEERING ECONOMY 3


    EXAMPLE 1:
    Generic Electric Company which manufacture electric motor has a capacity of
    producing 150 motors a month. The variable cost are P4000 per month, the
    average selling price is P750/motor. Fixed cost of the company amounts to
    P78000/month. Determine the number of motors to be produced per month to
    break even and the number of sales in pesos at this point.

    2023 ENGINEERING ECON 4


    EXAMPLE 2

    A plywood manufacturer produces a piece of plywood at a labor cost of P0.50


    and material at P3.0. The fixed charges on business are P50000/month and the
    variable cost is 0.50 a piece. If one plywood sells for P6.00 each, how many
    pieces must be produced each month for the manufacturer to break even?

    2023 ENGINEERING ECON 5


    EXAMPLE 3
    A hollow block making business can produce 15000 pieces a week. Their operation manager
    determined that in order to achieve this production, they need to spend P 90000 weekly
    on raw materials, electricity, labor and transportation. The company also pays a fixed
    amount of P 10000 weekly.
    (a)How much per piece should they sell their hollow blocks to gain a profit 40% of
    their total cost?
    (b) How many hollow blocks do they need to sell every week to break even?
    (c) Determine their profit if they run at 80% efficiency.

    2023 ENGINEERING ECON 6


    EXAMPLE 3
    A hollow block making business can produce 15000 pieces a week. Their operation manager
    determined that in order to achieve this production, they need to spend P 90000 weekly
    on raw materials, electricity, labor and transportation. The company also pays a fixed
    amount of P 10000 weekly.
    (a)How much per piece should they sell their hollow blocks to gain a profit 40% of
    their total cost?
    (b) How many hollow blocks do they need to sell every week to break even?
    (c) Determine their profit if they run at 80% efficiency.

    2023 ENGINEERING ECON 7

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