Break Even Quantity) Point Break-even occurs when ebit=0 Q(P.V-FC E EBIT QBE(P-V-FC =0 QBE) E FC BE =FC /(P- 16-11
16-11 Break-even occurs when EBIT = 0 ( - ) - = EBIT ( - ) - = 0 ( - ) = = / ( - )
Break-Even Sales) Point How to find the sales break-even point: SBE =FC +(VCBE S BE =FC+(QE)() or BE =Fc/[1-(C/S)] Refer to text for derivation of the formula 16-12
16-12 How to find the sales break-even point: = + ( ) = + ( )( ) or = / [1 - ( / S) ] * Refer to text for derivation of the formula
Break Even Point Example Basket Wonders(Bw) wants to determine both the quantity and sales break-even points when Fixed costs are $100,000 Baskets are sold for $43.75 each Variable costs are $18.75 per basket 16-13
16-13 Basket Wonders (BW) wants to determine both the when: are u Baskets are sold for u Variable costs are
Break-Even Point(s) Break-even occurs when QBE =FC /(P-V E=$100,000/($43.75-$1875) QBE =4,000 Units SBE =(QBE FC SgE=(4,000)($18.75)+$100,000 sBE=$175,000 16-14
16-14 Break-even occurs when: = / ( - ) = / ( - ) = = ( )( ) + = ( )( ) + =
Break-Even Chart Total Revenues Profits 250 Total Costs 175 Fixed Costs 100 Losses Variable Costs 50 010002,0003,0004,0005,0006,0007,000 16-15 QUANTITY PRODUCED AND SOLD
16-15 0 1,000 2,000 3,000 5,000 6,000 7,000 250 100 50