Example of break even

Example of break even

Break even is a point where the organization is able to recover its fixed cost only and therefore this is no profit no loss situation. There are two methods of calculating the break even point i.e.

Unit contribution Method

In this method fixed cost is divided by the unit contribution. this formula give a break even in terms of volume units to be sold to achieve the break even and number of unit can be multiplied to find the break even point in term of amount.

Sale price per unit	100
Material unit	50
Labour	10
Overheads	10
Fixed asset	60,000
Calculate break even

Solution

Sale price		100
Variable cost	(50+10+10)	70
Unit Contribution	(100-70)	30
Break even Sales	60,000/30	2,000 unit

	unit	Rate
Sales	2000	100	200,000
Variable Cost	2000	70	140,000
Contribution			60,000
Fixed cost			(60,000)
Profit			0