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    Break Even Point PPT 1

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    neham8164

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    Break Even Point PPT 1

    Uploaded by

    neham8164
    16 views13 pages

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    BREAK EVEN POINT PPT 1

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    © © All Rights Reserved

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    16 views13 pages

    Break Even Point PPT 1

    Uploaded by

    neham8164

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 13

    BREAK EVEN POINT

    Mirjam Nilsson
    ABOUT
    7/14/20XX Pitch deck title 2
    PROBLEM
    What is Break-Even
    Analysis?

    BREAK-EVEN ANALYSIS IN
    ECONOMICS, BUSINESS, AND
    COST ACCOUNTING REFERS TO THE
    POINT AT WHICH TOTAL COSTS AND
    TOTAL REVENUE ARE EQUAL. A BREAK-
    EVEN POINT ANALYSIS IS USED TO
    DETERMINE THE NUMBER OF UNITS
    OR DOLLARS OF REVENUE NEEDED TO
    COVER TOTAL COSTS (
    7/14/20XX Pitch deck title
    KEY
    HIGHLIGHTED

    •Break-even analysis refers to the


    point at which total costs and total
    revenue are equal.

    •A break-even point analysis is used


    to determine the number of units or
    dollars of revenue needed to cover
    total costs.

    •Break-even analysis is important to


    business owners and managers in
    determining how many units (or 4
    UNDERSTAN
    D BY GRAPH

    5
    EXPLAINTION
    1.The number of units is on the X-axis (horizontal)
    and the dollar amount is on the Y-axis (vertical).
    2.The red line represents the total fixed costs of
    $100,000.
    3.The blue line represents revenue per unit sold. For
    example, selling 10,000 units would generate 10,000
    x $12 = $120,000 in revenue.
    4.The yellow line represents total costs (fixed and
    variable costs). For example, if the company sells 0
    units, then the company would incur $0 in variable
    costs but $100,000 in fixed costs for total costs of
    $100,000. If the company sells 10,000 units, the
    company would incur 10,000 x $2 = $20,000 in
    variable costs and $100,000 in fixed costs for total
    7/14/20XX Pitch deck title 6
    costs of $120,000.
    Importance of Break-Even Point Analysis

    •What sales volume is required to produce the desired profits?


    •What is the minimum level of sales needed to avoid losses?
    •What effect will changes in fixed and variable costs have on profits?
    •How will the change in sales mix in the context of a multiproduct firm affect
    profits?
    •Which product is most profitable?
    •What effect will a simultaneous change in price, cost, and volume have on
    profits?

    7/14/20XX Pitch deck title 7


    Interpretation of Break-Even
    Analysis

    Break-even Loss when Reven


    Profit when Reve point when Reven ue < Total
    nue > Total ue = Total Variable Cost +
    Variable Cost + Variable Cost + Total Fixed Cost
    Total Fixed Cost Total Fixed Cost

    9
    Factors that Increase a Company’s Break-Even Point

    Increase in Equipment
    Increase in
    .
    customer sales production repair
    When there is an increase in
    customer sales, it means that costs
    The hard part of running a business
    In cases where the
    production line falters, or
    there is higher demand. A is when customer sales or product
    a part of the assembly
    company then needs to demand remains the same while the
    line breaks down, the
    produce more of its products price of variable costs increases,
    break-even point
    to meet this new demand such as the price of raw materials.
    increases since the target
    which, in turn, raises the When that happens, the break-even
    number of units is not
    point also goes up because of the
    break-even point in order to produced within the
    additional expense. Aside from
    cover the extra expenses production costs, other costs that
    desired time frame.
    Equipment failures also
    may increase include rent for a
    mean higher operational
    warehouse, increases in salaries for
    costs and, therefore, a
    employees, or higher utility rates.
    higher break-even.

    7/14/20XX Pitch deck title 10


    How to reduce the break-even
    point
    2. Outsourcing
    1. Raise
    product prices

    This is something that not Profitability may be


    all business owners want increased when a business
    to do without hesitation, opts for outsourcing, which
    fearful that it may make can help reduce
    them lose some customers. manufacturing costs when
    production volume
    increases. 11
    Every company is in business to make

    CONCLUSION some type of profit. However,


    understanding the break-even number of
    units is critical because it enables a
    company to determine the number of
    units it needs to sell to cover all of the
    expenses it’s accrued during the process
    of creating and selling goods or services.

    Once the break-even number of units is


    determined, the company then knows what
    7/14/20XX
    sales target it needs to set in order to generate
    Pitch deck title
    profit and reach the company’s financial goals.
    THANK YOU
    7/14/20XX Pitch deck title 13

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