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BEA
Break Even Analysis
Term | Definition |
---|---|
Break-Even Point (BEP) | The point at which a business makes neither a profit nor a loss |
Revenues | The monetary value of goods and services supplied to the customers |
Total revenues | Selling price per unit times the units of output |
Costs | The monetary value of resources acquired to produce goods and services |
Variable costs | They vary directly with changes in output levels |
Overhead costs | They remain fixed over a range of output levels |
Total costs | Variable cost per unit times the units of output plus overhead costs |
Contribution per unit | Selling price minus variable cost per unit |
Maximun production capacity | The maximum level of output that a business can sustain to make a product or provide a service |
BEP formula | Fixed costs divided by the contribution per unit |