AB 209 Breakeven point analysis

30 Sep No Comments

Breakeven Point Analysis

Breakeven point = total fixed expenses

Weighted average selling price-weighted variable expenses

Total Fixed Costs $ 2,000

Forecast net profit: 0

 CoffeeMuffinsLight meals
Sales price per unit$3$2$4
Variable cost per unit$0.5$1$2

Expected sales ratio

Cofee: 20%;
Muffins: 30%;
Light meals: 50%

Weighted average selling price:

= ($3 × 20%) + ($2 × 30%) + ($4× 50%) = $3.2

Weighted average variable expenses:

= ($0.5 × 20%) + ($1 × 30%) + ($2 × 50%) = $1.4

Therefore

= $2,000 / $3.2 – $1.4 =111 Units to breakeven point

With this analysis, I will be able to know how to set my prices, in order to achieve more. In this case, I might need to adjust the prices upward a little bit, because of the high number of units to be sold so as to achieve the breakeven point.




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