### Break Even Point

: It means the point of no profit and no loss. BEP is the volume of output or sales at which the total cost is exactly equal to the revenue. Below BEP the concern makes losses, at the BEP, the concern makes neither profit nor loss, above BEP, the concern earns profits. BEP is calculated in terms of units or value. Thus**Break Even Point**

Contribution per unit S – V

BEP (in Rs.) = Fixed Cost x Sales = Fixed Cost

# Break-even Point Equation Method

px = vx + FC + Profit |

Where,

**p**is the price per unit,**x**is the number of units,**v**is variable cost per unit and**FC**is total fixed cost.## Calculation

### BEP in Sales Units

At break-even point the profit is zero therefore the CVP formula is simplified to:px = vx + FC |

Break-even Sales Units = x = | FC |

p − v |

### BEP in Sales Dollars

Break-even point in number of sales dollars is calculated using the following formula:Break-even Sales Dollars = Price per Unit × Break-even Sales Units |

## Example

Calculate break-even point in sales units and sales dollars from following information:Price per Unit | $15 |

Variable Cost per Unit | $7 |

Total Fixed Cost | $9,000 |

__Solution__

We have,

p = $15

v = $7, and

FC = $9,000

Substituting the known values into the formula for breakeven point in sales units, we get:p = $15

v = $7, and

FC = $9,000

Breakeven Point in Sales Units (x)

= 9,000 ÷ (15 − 7)

= 9,000 ÷ 8

= 1,125 units

Break-even Point in Sales Dollars = $15 × 1,125 = $16,875= 9,000 ÷ (15 − 7)

= 9,000 ÷ 8

= 1,125 units

Contribution per unit PV Ratio