curs break even
DESCRIPTION
financial analysisTRANSCRIPT
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The break-even analysis
Lect. univ. dr. Costin Ciora
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Break Even Analysis
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A company can reach performance by reaching break-even. As the word tells us, at this point the company breaks its current results to even,
where
Revenues = Costs
Profit = 0
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Break Even Analysis
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REVENUES
Expenses (Costs)
Fixed Expenses
Variable Expenses
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Break Even Analysis
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REVENUES
Expenses (Costs)
Fixed Expenses
Variable Expenses
Quantity x Unit Price
Fixed Quantity x Variable unit costs
Quantity x Unit costs
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Break Even Analysis
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Case study: Mobile producer
Revenues: number of mobile sold x unit price
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Break Even Analysis
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Total expenses= Fixed expenses + Variable expenses
Fixed expenses: rents, management salaries, advertising do not depend on the volume of production
Variable expenses (direct productive): components, , raw material, workers salaries depend on the volume of production
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Break Even Analysis
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Break Even Analysis
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Break-even (no. of units) =
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Break Even Analysis
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Break-even (no. of units) =
Unit price = 310$Variable unit price = 220$Fixed expenses = 3.447.000$
Calculate break-even point
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Break Even Analysis
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Break-even (no. of units) =3,447,000
310220=
38,300
Revenues at break-even point= 38,300 units x 310$ = 11,873,000$Fixed expenses = 3,447,000 $Variable expenses = 38,300 units x 220$ = 8,426,000$
Profit = 0
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Break Even Analysis
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We consider the maximum production capacity to be 45,000 units
Break-even/Maximum production capacity=
38,300/45,000 = 85,11%
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Break Even Analysis
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We consider the maximum production capacity to be 45,000 units
Maximum Revenues = 45,000 units x 310$= 13,950,000 $Fixed expenses = 3,450,000$Variable expenses = 45,000 units x 220$ = 9,900,000$
Maximum profit = = 600,000$
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Questions?
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Break Even Analysis
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If we want to obtain a profit of 450,000$, how many units to we need to sell?
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Break Even Analysis
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Revenues Total expenses = 450,000$
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Break Even Analysis
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Revenues Total expenses = 450,000$(q x p ) - (Fexp + q x vc) = 450,000$
q x(p-vc) Fexp = 450,000$
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Break Even Analysis
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Revenues Total expenses = 450,000$(q x p ) - (Fexp + q x vc) = 450,000$
q x(p-vc) Fexp = 450,000$qx(310$-220$)=450,000$+3,447,000$
q x 90$ = 3,897,000$
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Break Even Analysis
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Revenues Total expenses = 450,000$(q x p ) - (Fexp + q x vc) = 450,000$
q x(p-vc) Fexp = 450,000$qx(310$-220$)=450,000$+3,447,000$
q x 90$ = 3,897,000$
q = 43,300 units
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Break Even Analysis
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No. of units for expected profit = +
No. of units for expected profit = +
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Break Even Analysis
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No. of units for expected profit = +
No. of units for expected profit =3,447,000+450,000
310220= 43,300 units
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Break Even Analysis
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38,300 units is the number of units needed to reach break-even
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Break Even Analysis
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38,300 units is the number of units needed to reach break-even
45,000 units is the maximum production capacity
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Break Even Analysis
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38,300 units is the number of units needed to reach break-even
45,000 units is the maximum production capacity
43,300 units is the number of units needed to be sold to reach a PROFIT of 450,000$
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Break Even Analysis
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38,300 units is the number of units needed to reach break-even
45,000 units is the maximum production capacity
43,300 units is the number of units needed to be sold to reach a PROFIT of 450,000$
600,000$ is the maximum profit
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Break Even Analysis
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Thank you!
Questions?
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