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Break Even Point

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Querist : Anonymous

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Querist : Anonymous (Querist)
15 March 2010 Dear Sir,

We are a Manufacturer & Jobworker of Auto/Engine Parts.

Pl. give us suitable format for BEP.
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CA RAMESH KUMAR AHUJA

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CA RAMESH KUMAR AHUJA (Expert)
15 March 2010 The break-even point for a product is the point where total revenue received equals the total costs associated with the sale of the product (TR = TC).

Break even analysis can also be used to analyze the potential profitability of an expenditure in a sales-based business.

Break even point (for output) = fixed cost / contribution per unit

contribution (p.u) = selling price (p.u) - variable cost (p.u)

You should calculate direct variable cost associated with job work of one unit; deduct it from the amount chargeable for single unit. This is your contribution per unit. Now divide total fixed cost with contribution per unit and the resultant will be your BEP in terms of units. Job work for any number of units in excess of this BEP will generate profits for you.
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