BREAKEVEN ANALYSIS An important tool for management decision making.

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Presentation transcript:

BREAKEVEN ANALYSIS An important tool for management decision making

Definition:- Breakeven point is the volume of sales needed to at least cover all your costs. Breakeven point is the volume of sales needed to at least cover all your costs. It is a point of NO PROFIT or NO LOSS. It is a point of NO PROFIT or NO LOSS.

FORMULAS FOR DETERMINING BREAKEVEN POINT Profit Volume Ratio = Sales divided by contribution. Profit Volume Ratio = Sales divided by contribution. Breakeven Sales Volume = Fixed Costs divided by Contribution per unit. Breakeven Sales Volume = Fixed Costs divided by Contribution per unit. Breakeven Sales Value = Fixed costs divided by Profit Volume Ratio. Breakeven Sales Value = Fixed costs divided by Profit Volume Ratio.

Rajaram Trading Co.Ltd. Breakeven Analysis Marginal Cost Statement sales100 Variable Cost Variable Cost30 Contribution Contribution70 Fixed Cost Break Even Volume Break Even Volume700

Breakeven analysis can also be done by drawing breakeven chart with the help of Excel. Breakeven analysis can also be done by drawing breakeven chart with the help of Excel. Steps: First create a table using appropriate equation wherever required for calculations. Example: Steps: First create a table using appropriate equation wherever required for calculations. Example: