BREAK EVEN ANALYSIS

1. Calculate:
i) The amount of fixed expenses
ii) The number of units to break even
iii) The number of units to earn a profit of Rs.40,000

The selling price per unit can be assumed at Rs.100.

The company sold in two successive periods 7,000 units and 9,000 units and has
incurred a loss of Rs. 10,000 and earned Rs.10,000 as profit respectively.

2. A company is making a loss of Rs.40,000 and relevant information is as follows: Sales

Rs.1,20,000: Variable Costs Rs.60,000: Fixed Cost Rs.1,00,000.

Loss can be made good either by increasing the sales price or by increasing sales volume.
What are Break Even Sales if:

a) Present sales level is maintained and the selling price is increased

b) If present selling price is maintained and the sales volume is increased. What would be
sales if a profit of Rs. 1,00,000 is required?
 2. A) Break Even Sales= Variable Cost + Fixed Cost = 60,000+ 1,00,000 =Rs.1,60,000

b) P/V Ratio= Contribution ( c )/ Sales (s) x100=Sales-Variable Cost/Salesx100

= 1,20,000-60,000/1,20,000x100

=50%

Break Even Sales= Fixed Cost/P/V Ratio= 1,00,000/50%=Rs.2,00,000

Desired Sales= Fixed Cost + Desired Profit/ P/V Ratio

= 1,00,000+ 1,00,000/50%

= Rs.4,00,000

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1. Sales RS. 7,00,000 Rs. 9,00,000

Profit/Loss -Rs.10,000 +Rs.10,000

P/V Ratio= Change in Contribution/Change in Sales X100

= 20,000/2,00,000X100= 10%

Contribution in Pd.1= 7,00,000x10%= 70,000

Loss in Pd 1= Rs.10,000

i) Fixed Cost= Contribution +/- Loss/Profit= 70,000 +10,000= 80,000

ii)Break Even Point Sales= Fixed Cost/ P/V Ratio= 80,000/10%= Rs.8,00,000

No. Of units to break even = Break Even Sales / Selling Price

=8,00,000/100= 8,000 units

Number of units required to earn a profit of Rs.40,000

= Fixed Cost + Desired Profit/ P/V Ratio

= 80,000+ 40,000/10%

=Rs. 12,00,000