盈亏平衡分析Breakeven analysis

Breakeven point is the level of activity at which neither a profit nor a loss is made.

When Profit=0, Total contribution=Total fixed costs

Assumptions:

(1)Total costs behave as a strictly linear semi-variable cost;

(2)Fixed costs remain fixed;

(3)Total variable costs change proportionally with volume;

(4)Unit selling prices do not change with volume;

(5)Costs and income are matched (there is no significant change in inventory level);

(6)Levels of efficiency and productivity do not change (as this would affect cost behavior);

(7)There is only a single product or a constant sales mix of more than one product;

(8)Total costs and total revenue are linear functions of output.

At breakeven point, profit=0, Total contribution=Number of units* Unit contribution, therefore, Number of units to be sold to breakeven=Total fixed cost/ Unit contribution

Sales volume to achieve a target profit= (Fixed cost+ Targeted profit)/Unit contribution

C/S ratio

Contribution/ sales ratio

Selling price which contributes to fixed overheads and profits.

Breakeven revenue=Fixed cost/(C/S ratio)

Margin of safety

The amount by which anticipated or existing activity exceeds (or falls short of) breakeven.

In units or $

Margin of safety= Budgeted sales- Breakeven sales

As a percentage

(Budgeted sales-Breakeven sales)/Budgeted sales *100%