Break Even Point in Sales Value

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Methods to Calculate Break Even Point in Sales ($) Value:

Break even point in sales ($) value may be calculated in two ways but both give the same answer:

(1) Formula:

break-even-sales-value1

Contribution ratio is calculated as:

contribution-ratio

Contribution ratio may be improved by:

  • Increasing the sale price.
  • Reducing the variable costs.
  • Switching production to products with higher contribution rate.

(2) Formula:

Break-even point in value may also be calculated as:

break-even-sales-value-2

Solved Example:

A company has a product, which is sold @ $21 per unit. The per unit variable costs are $14. Fixed costs are $0.70 per unit at the budgeted production level of 300000 units.

Required: 

What is the break even level in units and sales revenue?

Solution:

break-even-sales-value-example

To read another solved example, click target profits page. On this page solved example 2 is relevant to this article.