BREAK EVEN ANALYSIS

ALGEBRAIC APPROACH BEP(x) = Breakeven point in units BEP($) = Breakeven point in dollars P = price per unit (dollars received per unit after all discounts) x = Number of units produced TR = Total Revenue F = Fixed costs V = Variable costs TC = Total costs = F + Vx

Break-even calculations Break-even point is simply TR = TC which is essentially P(x) = F + V(x) Solving for x gives us the BEP formula i.e. BEP(x) = F or BEP($) = F P – V (P – V)/P Example: Twesheko contractors has fixed costs of K10,000,000 this period. Direct labour is K1500 per unit and material is K750 per unit. The selling price is K4000 per unit. What is the break-even in ZMK in this firm?

Break-even calculations BEP($) = F = 10,000,000 1-(v/p) 1 – ((1500+750)/4000 = 22 857 142.86 BEP (x) = F = 10,000,000 P – V 4000 – (1500+750) = 5 714.29