What is BEP? How is it calculated?
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Answer Posted / mohammad sazzad hossain khan
): Break-even Point is refers to the level of operation at
which the project neither makes profit nor loss is
calculated.
Fixed
Costs
Break-even point = -----------------------------------------
------------
Unit selling price – Unit variable
cost
If the fixed costs are Tk. 15 million, unit selling price
Tk. 250 and unit variable cost Tk. 150, the break-even
point works out to:
Tk. 15 million
Break-even point = --------------------------- = 1, 50,000
units
Tk. 250 – Tk. 150
In the case of a new project where the capacity utilization
level is expected to rise gradually over a period of 3 to 4
years, fixed cost are normally planned in such a way that
are stepped up as and when necessary to meet the projected
increase in capacity utilization. Hence the calculation of
the break-even point for a new project must be with
reference to the fixed costs expected to be incurred in the
third year or fourth year when the project is supposed to
reach the rated capacity utilization level.
Answer (b):
Fixed Costs
Break-even point = ------------------- X expected
production
(In terms of volume of Contribution in the
year
Production)
6,000,000
= ------------------ X 90,000
= 54,545 Units
9,900,000
Fixed Costs
Break-even point = ------------------- X
expected capacity utilization
(In terms of percentage of Contribution in
the year
Installed capacity)
6,000,000
= ------------------ X 90% =
54.55 percent
9,900,000
Fixed
Costs
Break-even point = ------------------- X
expected sales realization
Of Sales (In terms of Taka Contribution
in the year
6,000,000
= ------------------
X 18,000,000 = 10,909,090 Tk.
9,900,000
| Is This Answer Correct ? | 19 Yes | 6 No |
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