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    Break Even Point Analysis Numericals

    Uploaded by

    Sachin Sahoo
    The document provides information and calculations for break even analysis for a company. It includes: - Data on sales, variable costs, fixed costs, selling price, and production capacity for a company - Calculations of break even point, margin of safety, and profit based on the data - Explanations of how changes in fixed costs, variable costs, and selling price would affect break even point, total costs, sales, and margin of safety. Charts are suggested to illustrate these effects. - Worked examples and calculations for break even point using different data sets including sales, costs, profit, and production information. Formulas for calculating break even point, margin of safety, and profit are also provided.

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    Break Even Point Analysis Numericals

    Uploaded by

    Sachin Sahoo
    445 views7 pages
    The document provides information and calculations for break even analysis for a company. It includes: - Data on sales, variable costs, fixed costs, selling price, and production capacity for a company - Calculations of break even point, margin of safety, and profit based on the data - Explanations of how changes in fixed costs, variable costs, and selling price would affect break even point, total costs, sales, and margin of safety. Charts are suggested to illustrate these effects. - Worked examples and calculations for break even point using different data sets including sales, costs, profit, and production information. Formulas for calculating break even point, margin of safety, and profit are also provided.

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    BEP2

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    The document provides information and calculations for break even analysis for a company. It includes: - Data on sales, variable costs, fixed costs, selling price, and production capacity for a company - Calculations of break even point, margin of safety, and profit based on the data - Explanations of how changes in fixed costs, variable costs, and selling price would affect break even point, total costs, sales, and margin of safety. Charts are suggested to illustrate these effects. - Worked examples and calculations for break even point using different data sets including sales, costs, profit, and production information. Formulas for calculating break even point, margin of safety, and profit are also provided.

    Copyright:

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

    Break Even Point Analysis Numericals

    Uploaded by

    Sachin Sahoo
    The document provides information and calculations for break even analysis for a company. It includes: - Data on sales, variable costs, fixed costs, selling price, and production capacity for a company - Calculations of break even point, margin of safety, and profit based on the data - Explanations of how changes in fixed costs, variable costs, and selling price would affect break even point, total costs, sales, and margin of safety. Charts are suggested to illustrate these effects. - Worked examples and calculations for break even point using different data sets including sales, costs, profit, and production information. Formulas for calculating break even point, margin of safety, and profit are also provided.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 7
    At a glance
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    Break even point analysis is used to determine the sales volume needed to cover total costs. It helps understand how changes in costs, prices and sales volumes impact profits.

    Break even point analysis determines the level of sales or production at which total costs equal total revenue. It is used to understand profitability and risks of different production/sales levels.

    An increase in fixed costs will increase the break even point, as higher sales are needed to cover the increased total costs. This reduces the margin of safety and remaining profits for a given sales level.

    BREAK EVEN POINT ANALYSIS NUMERICALS

    Q. 38. ABC Ltd. Data is given below:

    You are required to calculate the Break Even point and Margin of safety and also to
    provide information to the management regarding the possible effects of the following
    contingencies (each to be considered separately.)
    1. Fixed costs increase by 10%
    2. Variable costs decrease by 20%
    3. Selling price is increased by 20%.
    Suitable charts may be presented showing the effect of these change in profit factors
    Workings:

    Note : Since fixed costs have increased by Rs. 6,000 profit will be reduced to some extent:
    (because other factors are remaining constant). This can be verified as follows:

    Sales = Rs.2,00,000

    Note : Since fixed costs have increased the Break-even sales will also be increased, in the chart
    shown below, the total costs line and the sales line intersect at a point indicating break-even sales
    of Rs. 1,32,000. Thus break-even sales is increased by Rs.12,000 (i.e., to absorb the additional
    fixed costs of Rs. 6,000. The company has to effect the sales for Rs. 12,000 more and react the
    B.E.P.) This can be checked as follows:

    i.e., an increase of Rs. 12,000.


    At the present level of sales, the break-even sales have increased. Therefore, the remaining
    margin(Margin of Safety) will be decreased i.e.,

    Q. 40. From the following data, calculate B.E.P. and P.V.R.

    . From the following, calculate the Cash Break-even Point.

    Q. 42. Sales are Rs 150,000 producing a profit of Rs. 4,000 in period 1. Sales are Rs.
    1,90,000 producing a profit of Rs. 12,000 in period II. Determine the BEP.
    Difference in profit = Rs. 8,000
    Difference in sales = Rs. 40,000
    Since the change in the sale must have led to the change in the profit, P/V ratio:
    Rs. 8,000 x 100 = 20%
    Rs. 40,000
    At BEP, Profit = Nil
    If Rs. 20 is to be reduced from profit, sales must be reduced by Rs. 100. To reduce profit by Rs.
    4,000 reduction in sale:
    (100 x Rs. 4,000/20 = 20,000
    B.E.P. = Rs. 1,30,000 (i.e. sales producing profit of Rs. 4,000 less reduction in sales of Rs,
    20,000 to wipe out the profit)
    Alternatively
    Total contribution on Rs. 1,50,000 @ 20%

    Rs. 30,000

    Profit

    Rs. 4,000

    Fixed expenses

    Rs. 26,000

    Q. 43. From the following figures ascertain the


    break-even sales.
    4

    Total cost equals sales, hence, there is neither profit nor loss.
    Q44. The sales of company are @ Rs. 200 per unit
    Variable cost
    Fixed cost

    Rs. 20,00,000

    Rs. 12,00,000
    Rs. 6,00,000

    The capacity of the Factory

    15,000 units

    Determine the BEP. How much profit is the company making?

    (* Total number of units is 10,000 since sale at Rs. 200 per units is Rs. 20,00,000. Therefore
    variable cost per unit is Rs. 12,00,000 10,000 = Rs. 120)
    Profit being earned

    At break-even point, the contribution is just equal to fixed costs, any sales above the Bill also
    provide the profit contribution. But as fixed costs are all met already such contributions become
    completely profit. The sales above BEP are known as margin of safety 1 he contribution from
    margin of safety sales is profit As P/V ratio is (contnbution/ sales) x 100 and as profit is the
    contribution from these sales above BEP (i.e.), margin of safety, the following formula also is
    true.

    Margin of Safety
    Thus, in the above illustration margin of safety sales = 2,500 units x Rs. 200 = 5,00,000.
    Profit = Rs. 2,00,000

    Q. 45. From the following information


    calculate:
    (1) P.V. ratio

    (ii) Break even point

    (iii) Margin of Safety


    Total sales

    Rs. 3,60,000
    6

    Fixed cost
    Selling price

    Rs. 1,00,000
    Rs. 100/Unit

    Variable cost (per unit) = Rs. 50


    (iv) if the selling price is reduced to Rs. 90 by how much is the margin of safety reduced ?

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