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Hi<BR><BR>Not sure if anyone can help but have been told the following to get breakeven by Profit Volume Ratio (PVR)<BR><BR>Add all sales/PVR=(answer)/selling price per unit = break even<BR><BR>What I do not understand is when they say all sales do they mean in monetary sense or units. And if you had 3 separate columns of sales do you add all three columns together then divide by the PVR.<BR><BR>Please can someone help really floundering on this one.
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Costing
The PV ratio is ther proportion of the sales revenue that is made up by contribution.<BR><BR>As it is a % you will get the same answer if you divide contribution per unit by selling price or if you divide total contribution by sales revenue.<BR><BR>Total fixed costs divided by PV ratio = sales revenue needed to break even (ie value of break even)<BR><BR>And if you take the answer from that sum and divide by price per unit you get the volume (number of units) needed to break even<BR><BR>To get total fixed costs you'd need to add however many columns you have of fixed costs, but sales are not needed.<BR><BR>You would need the projected sales to find the margin of safety - something else.<BR><BR>0 -
Costing
Thanks Sandy will now try and take that on board. Finding PVR really difficult to grasp.0 -
Costing
Sorry if I am hounding you but what if I did the same above but + target profit to sales divided by PVR (already given) and divided this by selling price. What would be the outcome of that.<BR><BR>Thanks for any help you can give.0 -
Costing
Target profit plus fixed costs<BR>divided by<BR>PV ratio<BR><BR>would show the value of sales needed to achieve the target profit0 -
Costing
Thanks Sandy. You are a great help to me.0