How to do Break Even Analysis?

rainee SG

Very de sian, this question has to appear in one of the exam papers I am giving to my students, and the worse thing is there is no answer for this particular exam paper. So asking for help from forumites here, esp those who have learnt abt this before...

Question is:

Using the following information, draw up a break even chart to calculate the break-even point of this company:

Sales: $40 million
Fixed Cost: $10 million
variable Cost: 50% of sales revenue

Can any kind soul here help? I tried to do it using the algebraic formula...

Break even point = 10 million/40 - 20 = 1/2 million unit

Is this correct? But dunno how to draw the chart Sad

haiz I shudnt even be teaching this, but dunno why this stray question appear in the exam of the module I am currently teaching now, and it is not even a Finance module.

Thanks in advance for any help Mr. Green

Darkness_hacker99 SG

The sales is how many months? 12?

rainee SG

bump bump Laughing

rainee SG

it doesnt say Sad

Mospeada SG

very simple leh

Darkness_hacker99 SG

How about Variable costs per unit?

rainee SG

then show me how to do lor Laughing

hisoka SG

econs arh?

sales means revenue per sale i guess.

so TC = FC +VC = 10 + 0.5*S*40

TR = S*40

S = number of sales

so for break even should be TR= TC bah. so its at S = 0.5?

not sure i'm pretty noob Embarassed

Mospeada SG

ok...let me work on excel then post the pic here

rainee SG

where you get the 0.5?

I also think it is at 0.5, but problem is how to draw up the graph?

rainee SG

thanks Mr. Green

sillyme SG

let p be profit
let s be sales revenue

profit = revenue - (fixed cost + variable cost)

p = s - ( 10 + 0.5s)

Draw graph.

Breakeven means profit is 0.

When p = 0, s = 20mil

ditzy SG

Oh, BEA!!! I do before, even when I was pursuing engineering in one of the management modules. Laughing I remembered doing it using an excel spreadsheet for an assignment, after that I throw everything back to the lecturer already.

Mospeada SG

done

Mospeada SG

rainee SG

yea make sense liaoz Mr. Green Thanks a lot...I go try draw the graph then u all see correct or not Very Happy

rainee SG

yeap, thanks Mr. Green

rainee SG

i tink i oso got do it before in my economics class, then i oso forgot how to do liaoz Laughing

all my colleagues oso forgot how to do it oledi

laurence82 SG

this is basic

wait till they get to profit maximisation for four market structures

i always got lost in that one

Mospeada SG

that was my forte