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Break even Analysis

  • It is the point where revenue becomes equal to costs.
  • It helps the firms make decisions about prices, costs and the level of sales

Types of Costs

  • fixed: fixed costs remain roughly the same regardless of sales / output levels
  • variable: these change with the change in production levels or sales

Unit Contribution = Selling Price - Variable Cost
Unit Contribution = 200 - 100
Unit Contribution = Rs. 100
Break-even Point = Fixed Cost / Contribution Margin
Break-even Point = 30,000 / 100
Break-even Point = 300 Units