Marginal costing

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Querist : Anonymous

Querist : Anonymous (Querist)

10 July 2012 how increase or decrease in fixed cost affect Break Even Point

Guest

Guest (Expert)

10 July 2012 The formula for Break Even Point is Fixed Cost/ P/V Ratio.

Suppose P/V Ratio is 50%. Fixed Cost is Rs. 5000. then BEP will be 5000/.5 = Rs. 10000.
That means you have to effect sales of Rs. 10000 to reach a point of no profit or no loss.

Another situation is suppose Fixed Cost has increased and it is now Rs. 6000. Then your BEP will be 6000/.5= Rs 12000.

This means that increase in fixed cost increases our point of no profit no loss in a business.

C.A Anshul Singhal

C.A Anshul Singhal (Expert)

10 July 2012 break even point depend on fixed cost.
example
total fixed cost of a.p industries---20000 RS
Variable cost-------------rs 2 per unit
selling price------------RS5
CONTRIBUTION-----------6-2=RS4
BREAK EVEN POINT(QTY)---20000/4=5000 UNIT
IF FIXED COST REDUCE TO RS15000. THEN
BREAK EVEN POINT ------15000/4=3750UNIT

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