√ Definition of Break Even Point, Formulas, Components, How to Calculate and Examples
Definition of Break Even Point, Formulas, Components, How to Calculate and Examples – In this discussion, we will explain about the Break Even Point. Which includes descriptions, formulas, components, how to calculate and examples of questions with complete and easy-to-understand explanations.
Definition of Break Even Point, Formulas, Components, How to Calculate and Examples
For more details, please see the review below carefully.
Definition of Break Even Point
Break Even Point, which is also known as breakeven analysis, is a condition or point where where the company in its operating activities does not make a profit and does not experience a loss Also.
Or in another language, Break Even Point (BEP), which is a breakeven point between the amount of profit and the cost of a product company in the same or balanced position, so that in the process it does not make a profit or loss.
Break Even Point is used to analyze the production of how many items are produced or how much money or profit must be received in achieving a break-even point or return on investment
In a company, before producing a product, the first thing the company does is to plan how much profit it wants to earn.
When running a business, it will incur production costs, so by using the Break Even Point to find out the time and level of costs the sales made do not place the business at a loss or are able to determine sales at market prices without forgetting the profits determined.
This happens because, production costs are the things that have the most influence on determining the selling price and on the contrary, by setting the Break Even Point it can be seen how many items and prices are at sale. Break Even Point analysis is used for other things such as for example in financial statement analysis.
In determining the Break Even Point, the following must be considered in advance so that it can be determined with certainty, namely:
- The target profit rate in a period
- Available production capacity
- The amount of costs that must be incurred, for example fixed costs and variable costs.
Break Even Point Formula
The formula for determining the Break Even Point is divided into 2 types, namely:
Basic Point Break Even Point Formula
How to calculate how many units of goods or services must be produced to obtain a break-even point.
BEP = FC / (P-VC)
Basic Sales Break Even Point Formula
How to calculate how many rupiah sales value that must be received to obtain a breakeven point:
FC/ (1 – (VC/P))*
Calculation (1 – (VC/P)) is often also referred to as Contribution Margin Per Unit.
Information:
BEP: Break Even Point
FC: Fixed Costs
VC: Variable Cost
Q: Price per unit
S: Sales Volumes
Break Even Point Components
In calculating how much the BEP or breakeven point must require components, these components are as follows:
-
Fixed Cost
This component is included in fixed or constant costs, if there is production activity or not in production. -
Variable Cost
This component is dynamic. The variable cost is called the cost per unit, which depends on the level of production volume.
If production increases, the variable cost will also increase. For example, the cost of raw materials, electricity costs and so forth. -
Selling Price
The definition of selling price is the selling price per unit of goods or services that have been produced.
How to Calculate and Examples of Break Even Point Questions
Is known:
Total Fixed Costs (FC) is Rp. 400 Million
Total Variable Cost (VC) per unit is Rp. 100 thousand
The selling price of goods per unit is Rp. 150 thousand
Calculation of BEP Units
BEP = FC / (P-VC)
BEP = 400.000 / (150.000 – 100.00)
BEP = 8000
Sales BEP Calculation
BEP = FC / (1 – (VC/P)
BEP = 400,000,000/ (1 – (100,000/150,000)
BEP = 1,333,333,333.4
Based on the above calculation analysis, the company can find out the profit to be obtained according to the minimum sales amount. The formula for calculating the profit target is as follows:
BEP – Profit = (FC + Profit Target) / (P – VC)
FC, VC, and P follow the previous example, with the addition that these companies have a profit target of 100 million per month.
BEP – Profit = FC + Profit Target) / (P – VC)
BEP – Profit = (400,000,000 + 100,000,000) / (150,000 – 100,000)
BEP – Profit = 500,000,000 / 50,000
BEP – Profit = 10,000 units or
BEP – Profit = IDR 1,000,000,000 (obtained from: 10,000 units x IDR 100,000)
Thus has been explained about Definition of Break Even Point, Formulas, Components, How to Calculate and Examples, hopefully can add to your insight and knowledge. Thank you for visiting and don't forget to read other articles.
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