1. Break-even points can be calculated based on fixed costs, variable costs per unit, and margin contribution per unit using the following formula.
EXAMPLE
The Yang Yang Manufacturing Company is a factory that manufactures badminton racket. Details of the expenditure are as follows:
2. The Break-even Point calculation assumes that:
a) the total cost consists of fixed costs and cost changed.
b) Fixed costs consist of overhead costs.
c) Cost changed consist of material cost and labor cost.
d) firms only produce a type of release only
3. The firm’s fixed cost is the same despite changes in the amount of release. For example rent, and insurance.
The cost changed in the firm’s firms changes just as the change in production. For example, the cost of raw materials and direct labor costs.
5. The break-even point can be represented in the form of graphs or through a contribution margin formula.