How to calculate a Break- even quantity, Break - even revenue with examples:- StudySpot02

How to calculate a Break- even quantity,  Break - even revenue  with examples .

Q1. A company has a fixed cost of rupees ₹1,00,000 and Average varible cost is rupees ₹5 per unit and company selling its product ₹15 per unit. What will be the Break- even revenue (BER)  and Break-even quantity (BEQ)?

Answer:- Given:- fixed cost :-₹1,00,000.

Average variable cost :- ₹15.

Price :- ₹15.

Find :- BER and BEQ.

Formula :- BER = fixed cost (f) ÷ contribution margine (C); where C = Price(p) - variable cost(V)÷ price(p).

BEQ = fixed cost (f)÷ price(p) - Average variable cost(AVC).

Solution:- BER =f÷p- AVC 

=1,00,000÷15 -5

=1,00,000÷10 

= 10, 000. 

BEQ= f/ ÷C(p- v÷p )

=1,00,000 ÷(15-5÷15)

=1,00,000÷0.666666

=1,50,000.

Total revenue = Price × quantity 

=15× 10,000

= 1,50,000.

Total cost = total fixed cost + variable cost ×quantity 

=1,00,000+5×10,000

=1,00,000+50,000

=1,50,000.

[Note :- For verifying our BER is correct or not we need to find total revenue and total cost. Because BER should always be equal as Total revenue and total cost . The formula for finding total revenue and total cost are given below :-

Total revenue = Price ×quantity.

Total cost = total fixed cost + Total variable ×  quantity. ]

2Q. A movie hall had seating capacity of 500 per show the tickets are price at ₹ 200 per show the Average variable cost is ₹50 and the fixed cost is ₹60,000. Find Break -even quantity and break- even revenue?

Answer:- Given :- price:- ₹200.

Average variable cost :-₹50.

Fixed cost :-₹60,000.

Find:- BER and BEQ.

Formula:- BER = f÷C

BEQ = f÷ p- AVC. 

Solution= BEQ= F÷P-AVC

= 60,000÷150

=400.

BER= F÷C (P-V÷P)

=60,000÷200-50÷200

= 60,000÷ 150÷200

=60,000÷0.75

=80,000.

TOTAL COST = TOTAL FIXED COST +Variable COST ×QUANTITY 

= 60,000+50×400

=60050×400

80,000.

Total revenue = Price ×quantity 

= 200×400

=80,000.



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