Break even point
Esme
Registered Posts: 711 Epic contributor 🐘
Hi,
Does anyone have a formula for calculating break even point in terms of sales revenue? The only way I can find in my book is by drawing a graph... which looks a bit complicated!
Thx in advance!
Does anyone have a formula for calculating break even point in terms of sales revenue? The only way I can find in my book is by drawing a graph... which looks a bit complicated!
Thx in advance!
0
Comments
-
Breakeven in Units Fixed costs/contribution0
-
Not sure if you needed them but heres the others i got from a very nice fello AATer
Management Account Formulas
Contribution Selling price per unit-variable costs per unit
Breakeven in Units Fixed costs/contribution
PV Ratio Contribution/sales price
Breakeven in Revenue Fixed costs/pv ratio
Margin of Safety in Units Forecast-breakeven
Margin of Safety % Margin of safety in units/forecast x 100
Target Profit Fixed costs + target profit/contribution0 -
Thanks.. I've got the answer in units but also need to show it in terms of sales revenue?!0
-
So multiply break-even in units by selling price to get break-even in sales revenue.0
-
Most questions in the past have been written in a way that let you find the break even number of units and simply multiply that amount by the price per unit.
The standards would allow the examiner to present a profit and loss account for a business e.g. a restaurant or pub, and then ask for the breakeven sales revenue.
Restaurants sell a variety of products, so calculating breakeven in terms of units is not useful.
So take 2 steps- Calculate the contribution % of the revenue. (Sales revenue less variable costs) divided by sales revenue. (Called the PV ratio, but I advise you to keep it as a decimal rather than converting it to a %)
- Then take the fixed costs and divide by the answer to 1.
This gives the Sales Revenue needed to break even.Sandy
sandy@sandyhood.com
www.sandyhood.com0 -
Thanks Marknotgeorge and Sandy.. I was thinking it was much more complicated than it actually was!0
Categories
- All Categories
- 1.2K Books to buy and sell
- 2.3K General discussion
- 12.5K For AAT students
- 319 NEW! Qualifications 2022
- 157 General Qualifications 2022 discussion
- 11 AAT Level 2 Certificate in Accounting
- 56 AAT Level 3 Diploma in Accounting
- 92 AAT Level 4 Diploma in Professional Accounting
- 8.8K For accounting professionals
- 23 coronavirus (Covid-19)
- 272 VAT
- 92 Software
- 274 Tax
- 136 Bookkeeping
- 7.2K General accounting discussion
- 201 AAT member discussion
- 3.8K For everyone
- 38 AAT news and announcements
- 345 Feedback for AAT
- 2.8K Chat and off-topic discussion
- 582 Job postings
- 16 Who can benefit from AAT?
- 36 Where can AAT take me?
- 42 Getting started with AAT
- 26 Finding an AAT training provider
- 48 Distance learning and other ways to study AAT
- 25 Apprenticeships
- 66 AAT membership