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### Et 104 cvp analysis bep

1. CVP ANALYSIS Breakeven Point and Target Income
2. CVP ANALYSIS • Breakeven point (BEP) is that quantity of output sold at which total revenues equal total costs resulting to zero operating income. • USE of BEP: tells managers how much output they have to sell to avoid a loss
3. Contribution Income Statement for Different Quantities of Do-All Software Packages Sold Per Number of Packages Sold pac kag 0 1 5 25 40 e Revenues 200 0 200 1,000 5,000 8,000 Variable Costs 120 0 120 600 3,000 4,800 Cont. Margin 80 0 80 400 2,000 3,200 Fixed Costs 2,000 2,000 2,000 2,000 2,000 Operating (2,000) (1,920) (1,600) 0 1,200 Income
4. Breakeven Point and Target Income BEP (units) = Fixed costs = \$2000 = 25 units Cont margin/unit \$80 BEP revenues = Fixed costs = \$2000 = \$5,000 Cont margin % 40% Cont margin % = Cont margin per unit = \$80 = 40% Selling price \$200
5. Target Operating Income Quantity of units = FC + target operating income required to be sold Cont margin per unit Quantity of units = \$2000 + \$1200 = 40 units required to be sold \$80 per unit Revenues needed = \$2000 + \$1200 = \$3200 = \$8000 To earn \$1200 Cont margin 40% .40
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