• Break even point ( BEP) is the point where
the revenue is equal to total cost. At BEP,
the company makes neither profit nor loss.
This point is important to determine the
price of a product such that the company
still gains net profit.
Excel BEP
Prepared by: Fidan Akbaş
Source:http://people.revoledu.com/kar
di/tutorial/Excel/BreakEvenPoint.html
You may have fixed cost, Fc, that you must pay every
month regardless how much sales that your company
can get
1. such as worker salary,
2. building operation and maintenance,
3. machine and equipments
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There is also variable cost, Vc,
1. such as materials,
2. energy supply (oil or electricity),
3. and worker wages that depend on the production or
sales. Higher sales, you may want to produce more and
eventually paid higher variable cost.
• The break event point happens when the total
cost is equal to revenue Tc=R , or which is
equivalent to Fc + v*n =n*p or
equation 1
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Let
v : variable cost/ unit
n :total sales
So variable cost : Vc= v*n and
Total cost Tc= Fc + Vc .
Your company revenue R is depend on n
the total sales and p the price of the
product , or R=n*p.
R=n*p
• For variable cost/unit, v= $ 1,5/unit, fixed
cost Fc= $90 and product
price/unit p=$3/unit,
? Find breakbreak-even unit and BEP.
? Draw the graph shows relationship of
revenue, total cost and fixed cost.
• Thus, the break-even point price is obtained
from revenue line at n*
equation 2
1
Excel sheet
• We get break-even at $180 for 60 units
sales. The graph relationship of revenue,
total cost and fixed cost is as shown.
Clearly, the BEP is the intersection point
between Revenue line and Total Cost line.
• Now suppose you want to know how much
is the price should be so that the breakeven point is at $200. You can manipulate
it easily from equation 2 to get the, p,
price/unit . Nevertheless, you can also use
MS Excel Goal seek to compute it for you.
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