Break Even Point BEP Questions PDF

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Break Even Point BEP Questions...

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Break-Even Analysis TR= Price∗Quantity = P∗Q TC=Totalvariable cost (TVC )+ Total ¿ Cost ( TFC) ATC =

TC Q

AVC =

TVC Q

AFC =

TFC Q

Break-Even Point (BEP) is achieved where TR=TC. (No profit no loss situation) Profit ( π )=TR −TC

Example: Production of ‘Pen’ TFC=10,00,000 Now to produce one pen, you require: AVC=Rs.10 Price=Rs.15 For selling one pen, how much will be your profit? Profit= P-AVC= Rs.5(CM before BEP and profit after BEP)

How much units of output you required to produce in order to recover your TFC (if Rs.5 is getting recovered from each unit)?

Break EvenOutput ( Q B )=

TFC 10,00,000 TFC = = =2,00,000 units CM P− AVC 5

After this, if you produce 1 extra unit, how much will be Contribution Margin (CM)= P-AVC= Rs.5

Break-Even Point (BEP) is achieved where TR=TC (No profit and no loss).

Your price has to be at least equal to or greater than the AVC. With P=15, Q_B=TFC/(P-AVC)=2,00,000 units

CM=P-AVC

Break Even output (Q_B)=TFC/CM=TFC/(P-AVC)

Total contribution (TC)=Unit contribution (CM)*Q_B=5*2,00,000=10,00,000=TFC...