AB 209 Breakeven point analysis
Breakeven Point Analysis
Breakeven point = total fixed expenses
Weighted average selling price-weighted variable expenses
Total Fixed Costs $ 2,000
Forecast net profit: 0
| Coffee | Muffins | Light 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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