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 â‚ą1,00,000 and Average varible cost is rupees â‚ą5 per unit and company selling its product â‚ą15 per unit. What will be the Break- even revenue (BER)  and Break-even quantity (BEQ)?

Answer:- Given:- fixed cost :-â‚ą1,00,000.

Average variable cost :- â‚ą15.

Price :- â‚ą15.

Find :- BER and BEQ.

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

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

Solution:- BER =fĂ·p- AVC 

=1,00,000Ă·15 -5

=1,00,000Ă·10 

= 10, 000. 

BEQ= f/ Ă·C(p- vĂ·p )

=1,00,000 Ă·(15-5Ă·15)

=1,00,000Ă·0.666666

=1,50,000.

Total revenue = Price Ă— quantity 

=15Ă— 10,000

= 1,50,000.

Total cost = total fixed cost + variable cost Ă—quantity 

=1,00,000+5Ă—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 Ă—quantity.

Total cost = total fixed cost + Total variable Ă—  quantity. ]

2Q. A movie hall had seating capacity of 500 per show the tickets are price at â‚ą 200 per show the Average variable cost is â‚ą50 and the fixed cost is â‚ą60,000. Find Break -even quantity and break- even revenue?

Answer:- Given :- price:- â‚ą200.

Average variable cost :-â‚ą50.

Fixed cost :-â‚ą60,000.

Find:- BER and BEQ.

Formula:- BER = fĂ·C

BEQ = fĂ· p- AVC. 

Solution= BEQ= FĂ·P-AVC

= 60,000Ă·150

=400.

BER= FĂ·C (P-VĂ·P)

=60,000Ă·200-50Ă·200

= 60,000Ă· 150Ă·200

=60,000Ă·0.75

=80,000.

TOTAL COST = TOTAL FIXED COST +Variable COST Ă—QUANTITY 

= 60,000+50Ă—400

=60050Ă—400

80,000.

Total revenue = Price Ă—quantity 

= 200Ă—400

=80,000.



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