Download A Single Product Break Even Analysis Example

A Single Product Break Even Analysis Example
BEP$ =
F
1 V
 P
Where
BEPx =
BEP$
BEPx
F
V
P
F
P V
= Break-even in dollars
= Break-even in units
= Fixed Costs
= Variable Costs per Unit
= Price per Unit (after all discounts)
Example: A Dickie-Dee ice cream cart costs $12,000. Direct labour for the driver amounts to
$1.20 per unit, and “Rocket” treats cost $0.80 per unit to prepare. The selling price of each
“Rocket” treat is $3.50. What is the break even point?
Break-even point in dollars:
BEP$ =
F
1 V
 P =
Break-even point in units:
BEPx =
F
P V
A Multiple Product Break-Even Analysis Example
F
BEP$ =
 V 

 1  Pi   Wi 
i 


Where W i = The percent of each product of total sales
Example: The Dickie-Dee cart owner now will sell three types of frozen treats,
“Rockets”, “Zipper-Bars”, and “Cherry Blasters”. Use the information below to calculate
the break even point in dollars.
Item
Price
(P)
Cost
(V)
Rocket
Zipper
Cherry
3.50
3.25
3.60
2.00
1.50
2.10
V/P
1-(V/P)
Annual
Sales –
Units
7,000
8,000
4,000
Annual
Sales $
% of
sales
Weight
W

BEP$ =
F
 V
 1  Pi
i



  Wi 


=
(1-V/P)
xW