÷ (100 + 200) = Rs 40 (weighted average variable cost per unit) ÷ (100 + 200) = Rs 66.67 (weighted average selling price per unit) To calculate the time breakeven point, you would first calculate the weighted average selling price per unit and the weighted average variable cost per unit: This means you would need to generate Rs 47,965 in revenue across both products per month to break even. Then, you would divide the total fixed costs by the weighted average contribution margin ratio: To calculate the revenue breakeven point, you would first calculate the weighted average contribution margin ratio: This means you would need to sell 400 units across both products per month to break even. Then, you would divide the total fixed costs by the weighted average contribution margin per unit: To calculate the unit breakeven point, you would first calculate the weighted average contribution margin per unit: In the last month, you sold 100 units of Product A and 200 units of Product B. Your fixed costs are Rs 20,000 per month. Product A sells for Rs 100 and has a variable cost of Rs 60, while Product B sells for Rs 50 and has a variable cost of Rs 30. Suppose you run a business that offers two products: Product A and Product B. If you want the answer in months, you can skip this step. * Note that the “12” in the formula represents the number of months in a year. Time breakeven point = Total fixed costs ÷ (Weighted average selling price per unit – Weighted average variable costs per unit) ÷ 12 (if you want the answer in years) * The weighted average contribution margin ratio is the average contribution margin per unit divided by the average selling price per unit, weighted by their relative sales mix. Revenue breakeven point = Total fixed costs ÷ Weighted average contribution margin ratio * The weighted average contribution margin per unit is the average contribution margin per unit across all the products or services offered by the business, weighted by their relative sales mix. Once you have this information, you can use one of the following formulas: Unit breakeven point = Total fixed costs ÷ Weighted average contribution margin per unit To calculate the breakeven point for a business, you need to determine the fixed costs, variable costs, and selling prices of all the products or services that the business offers. It is calculated by dividing total fixed costs by the difference between the selling price per unit and the variable costs per unit and is usually expressed in months or years.Įach of these breakeven points provides a different perspective on the financial health of a business and can be used to make decisions about pricing, production, and sales volume. Time breakeven point: This is the amount of time it takes for a business to break even, based on its fixed costs, selling price, and variable costs per unit.The contribution margin ratio is the contribution margin per unit divided by the price per unit. It is calculated by dividing total fixed costs by the contribution margin ratio. Revenue breakeven point: This is the level of revenue a business needs to generate in order to cover its total costs and break even.The contribution margin per unit is the difference between the price of a unit and the variable costs associated with producing that unit. It is calculated by dividing total fixed costs by the contribution margin per unit. Unit breakeven point: This is the number of units a business needs to sell in order to cover its total costs and break even.There are three main types of breakeven points that businesses can calculate: Variable costs, on the other hand, are expenses that vary with the level of production or sales, such as raw materials or labour costs. Fixed costs are expenses that do not change regardless of the level of production or sales, such as rent or salaries. In other words, the breakeven point is the level of sales that a company must achieve in order to cover its fixed and variable costs. At the breakeven point, a company is not making a profit, but it is also not experiencing a loss. The breakeven point is a term used in finance and business that refers to the point at which the revenue earned by a company equals the costs associated with producing and selling a product or providing a service.
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