# Breakeven Point Homework Help

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Let us know more Breakeven Point

The breakeven point submits to revenues that are needful to cover the business’s total expenses during the given period. The total revenues can be affirmed in terms of dollars, hours and units of services.

Assumptions of breakeven point

The calculations of breakeven have bases on assumptions, which states that the alteration in revenues relates to change in expense.

The presumption many not work due to following reasons-

• A firm is likely to possess many different products with various degree of prosperity( profitability)
• A business may possess various customers with different demand for extraordinary attention. Therefore, few expenses increase for such reasons other than sale of supplementary products.
• A business may offer products for sale in various markets. This will result in selling price in a market lower than selling price in opposite market.
• The business may report regular fluctuations in the sales mix.

Calculation of breakeven point

The primary calculation of break-even in the sales dollar for one year is-

• Fixed expense for a year divided by contribution margin’s ratio.

The calculation of breakeven point in the units sold in one year is-

• Fixed expense for a year divided by contribution margin of per element.

What augments the breakeven point?

The BEP will augment when the aggregate fixed expenses and costs augments. The BEP will also hike when variable expenses hike without an equivalent hike in selling price.

A business with various products can note its BEP increase when mix of commodities changes. In other words, if a superior proportion of the inferior contribution margin commodity sells, the BEP will hike.

Margin of safety

The margin of safety helps in the BEP analysis to determine the quantity of sales, which are more than the BEP.

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