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Break Even Analysis

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Added on  2020-03-16

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BREAK EVEN ANALYSIS BREAK EVEN ANALYSIS 3 Break even analysis Name of the student Name of the university Author note Break – Even analysis 2 Example of Break-Even Analysis 4 Reference 6 Break – Even analysis The point where the total fixed cost and variable cost of a product comes equal with the revenue or in other words, the profit is zero that point is called as the break-even point (BEP). This figure can be confirmed by dividing the contribution $ 60.00 by the contribution

Break Even Analysis

   Added on 2020-03-16

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Running head: BREAK EVEN ANALYSISBreak even analysisName of the studentName of the universityAuthor note
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1BREAK EVEN ANALYSIS Table of ContentsBreak – Even analysis................................................................................................................2Example of Break-Even Analysis..............................................................................................4Reference....................................................................................................................................6
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2BREAK EVEN ANALYSIS Break – Even analysisThe point where the total fixed cost and variable cost of a product comes equal withthe revenue or in other words, the profit is zero that point is called as the break-even point(BEP). At BEP, the product does not suffer any loss or makes any point. The amount of salesrequired to made for break-even is called as the break-even analysis (Marshall 2016).Generally the concept of break-even is depended upon three major assumptions, these are – 1.Average sales per unit – this is the price of the product per unit. it takes into accountthe discounts and sales the figures are obtained from the sales forecast. However, forthe businesses that are based on non-unit, calculation of per unit profit and percentageof dollar profit is quite impossible (Baddon et al. 2017). The important question hereis that the input is related to average number of product and converting it to singleestimate is quite impossible. 2.Average per unit cost – this is the variable cost or the incremental cost per unit ofsales. If the company purchase products for resale, the price is paid as average forselling the goods. Further, if the unit based forecast table for sales are in use formixed and manufacturing businesses, the company can project the unit cost from theforecast of the sales (Potkany and Krajcirova 2015). 3.Monthly fixed cost – the break even analysis states the fixed cost that will be carriedon beyond the break-even point. Rather, it is recommended to use the regular runningfixed cost. Break-even analysis assists in determination of production level or the targeted salesmix. The management’s analysis only uses the calculations and metrics that are not requiredfor disclosing to the external sources like investors, financial institutions and regulators.Break-even takes into consideration the fixed cost level as compared to revenue earned by
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