(Break-even point)
Break-even point for single product
● Contribution margin per unit = sales price per unit – variable cost per unit
CM per unit= SPPU – VCPU
● CM ratio = SPPU – VCPU or = 1- VCPU
SPPU SPPU
Selling price is L.E 5, variable cost is L.E 3 and total fixed cost L.E 160000
Required:
Determine break-even point in units and pounds
BEP in units = FC = 160,000 = 160,000 = 80000unit
CM per unit 5-3 2
BEP in LE =BEP in units × selling price per unit = 80000 × 5 = 400000LE
OR = FC = 160,000 = 160,000 = 400000LE
CM ratio 5-340 %
5
ELNASR Company sells its product at L.E 30 per unit, variable costs are L.E 22 per unit and fixed costs are L.E 100,000.
Required:
1-Compute breakeven point in units and in pounds.
2-If the company sells 30,000 units, compute the net income
3-Calculate net income when the company increased selling price to L.E 35.
4-How many units must be sold to achieve target profit of L.E 100,000?
5-Suppose the company predicts a sales volume of 30,000 units per month at L.E 30, what is the margin of safety:
a- in units b- in pounds c- as a ratio.
------
(1)
BEP in units= FC = 100,000 = 100,000 = 12500units
CM per unit 30-228
BEP in LE = BEP in units × SPPU = 12500 × 30 = 375000 LE
Or = FC = 100,000 = 375000 LE
CM ratio 30-22
30
(2)Net income = sales – total variable costs – total fixed costs
= 30000 ×30 - 30000× 22 – 100000 = 140000LE
(3)Net income = sales – total variable costs – total fixed costs
= 30000 ×35 - 30000× 22 – 100000 = 290000LE
(4)Unitssold to achieve 100,000 LE profit
= FC + target profit = 100,000 +100,000 = 25000unit
CM per unit 30-22
(6)Margin of safety
a-in units = budgeted sales(in units) - BEP (in units)
= 30000- 12500 = 17500 unit
b-in pounds = budgeted sales ( in LE ) - BEP (in LE )
= 30000× 30 - 12500× 30 = 525000 LE
c-as a ratio(percentage)
= Margin of safety (in units) × 100
budgeted sales (in units)
= 17500 × 100 = 58.3 %
30000
COOKDOOR sells quick meals, total fixed costs are L.E 180,000the selling price per meal is L.E 50 and the variable cost per meal is L.E 20
Required:
a-compute the breakeven point in number of meals served and in pounds
b-Prepare a simple income statement at the breakeven point.
c-Calculate net income when Cookdoor increases the selling price per meal into L.E 80.
A-
▪BEP in units= FC = 180,000 = 180,000 = 6000 unit
CM per unit 50-20 30
▪BEP in pounds = BEP in units × SPPU = 6000 × 50 = 300,000 LE
Or = FC =180,000 = 300,000 LE
CM ratio 50-20
50
B- Simple income statement at the breakeven point
Total / Per unit / Percentage%Sales 6000× 50
-
Variable costs 6000×20
Contribution margin
-
Fixed costs / 300,000
120,000
180,000
-
180,000 / 50
-
20
30
- / 100 %
40 %
60%
Net profit / 0
C-Net income = sales – total variable costs – total fixed costs
= 6000 ×80 - 6000× 20–180000 = 180000 LE
If selling price is L.E 5 , total fixed cost L.E 160000 and the contribution margin ratio is 40%
Required:
Determine break-even point in units and pounds.
▪BEP in pounds = FC = 160,000 = 400,000 LE
CM ratio 40%
▪ BEP in units = BEP in pounds = 400,000 = 80,000 unit
Sales price per unit 5
***If he required variable cost per unit
CM ratio = SPPU – VCPU
SPPU
40% = 5 – VCPU
5
2 = 5 – VCPU
VCPU = 5-2= 3
1