if company have the fixed and variable cost then it is possible to calculate it. or in the current sunario the cost of raw material is changing rapidly so it is not cost effective to calculate it again and again.
The Break-even Analysis depends on three key assumptions:
This is the price that you receive per unit of sales. Take into account sales discounts and special offers. Get this number from your Sales Forecast. For non-unit based businesses, make the per-unit revenue $1 and enter your costs as a percent of a dollar. The most common questions about this input relate to averaging many different products into a single estimate. The analysis requires a single number, and if you build your Sales Forecast first, then you will have this number. You are not alone in this, the vast majority of businesses sell more than one item, and have to average for their Break-even Analysis.
This is the incremental cost, or variable cost, of each unit of sales. If you buy goods for resale, this is what you paid, on average, for the goods you sell. If you sell a service, this is what it costs you, per dollar of revenue or unit of service delivered, to deliver that service. If you are using a Units-Based Sales Forecast table (for manufacturing and mixed business types), you can project unit costs from the Sales Forecast table. If you are using the basic Sales Forecast table for retail, service and distribution businesses, use a percentage estimate, e.g., a retail store running a 50% margin would have a per-unit cost of .5, and a per-unit revenue of 1.
Technically, a break-even analysis defines fixed costs as costs that would continue even if you went broke. Instead, we recommend that you use your regular running fixed costs, including payroll and normal expenses (total monthly Operating Expenses). This will give you a better insight on financial realities. If averaging and estimating is difficult, use your Profit and Loss table to calculate a working fixed cost estimate-it will be a rough estimate, but it will provide a useful input for a conservative Break-even Analysis.
Illustration 2 shows a Break-even chart. As sales increase, the profit line passes through the zero or break-even line at the break-even point.
Illustration 2: Break-even chart
The illustration shows that the company needs to sell approximately 1,222 units in order to cross the break-even line. This is a classic business chart that helps you consider your bottom-line financial realities. Can you sell enough to make your break-even volume?
The break-even analysis depends on assumptions made for average per-unit revenue, average per-unit cost, and fixed costs. These are rarely exact. We recommend that you do the break-even table twice: first, with educated guesses for assumptions, as part of the initial assessment, and later on, using your detailed Sales Forecast and Profit and Loss numbers. Both are valid uses.
Breakeven point is the point where firm has no profit no loss while breakeven analysis is the process of finding out the breakeven point.
breakeven analysis
Breakeven analysis is that in which companies tries to find out the number of units which must be sold to completely recover the fixed cost incurred by company for production.
breakeven analysis
breakeven = fixed cost / contribution margin ratiocontribution margin ratio = sales - variable cost / sales
Breakeven point is the point where firm has no profit no loss while breakeven analysis is the process of finding out the breakeven point.
there is no advantage or diadvantages of break even
The assumptions of Probit analysis are the assumption of normality and the assumption for linear regression.
Breakeven Analysis is the process of categorizing costs of production between variable and fixed components and deriving the level of output at which the sum of these costs, referred to as total costs per unit become equal to sales revenue. The analysis helps to determine the 'Breakenev Point' from this point of equality of sales revenue with total costs. At the breakeven point, the production activity neither generates a profit nor a loss. Breakeven analysis is used in production management and Management Accounting.
Breakeven analysis is the relationship between cost volume and profits at various levels of activity, with emphasis being placed on the breakeven point. The breakeven point is where the business neither recieve a profit nor a loss, this is when total money recieved from sales is equal to total money spent to produce the items for sale.Uses of a breakeven analysisBreakeven analysis enables a business organization to:Measure profit and loses at different levels of production and sales.To predict the effect of changes in price of sales.To analysis the relationship between fixed cost and variable cost.To predict the effect on profitablilty if changes in cost and efficiency.Even though breakeven has these advantages or uses, there are also several demerits of break even analysis.
breakeven analysis
Breakeven analysis is that in which companies tries to find out the number of units which must be sold to completely recover the fixed cost incurred by company for production.
breakeven analysis
Breakeven analysis and cost-oriented pricing are usually used together to measure the potential impact on pricing objectives prior to deciding on final prices. Both of these tools allow managers to identify prices that allow companies to reach their objectives.
Breakeven analysis guides the management about the production and sales level to recover costs as well as to acheive desired profit level.
breakeven = fixed cost / contribution margin ratiocontribution margin ratio = sales - variable cost / sales
breakeven analysis