Break-Even Chart

Break-Even Chart is the most useful graphical representation of marginal costing. It converts accounting data to a useful readable report. Estimated profits, losses, and costs can be determined at different levels of production. Let us take an example.

Example                                             

Calculate break-even point and draw the break-even chart from the following data:

Fixed Cost    = Rs 2,50,000
Variable Cost = Rs 15 per unit
Selling Price = Rs 25 per unit
Production level in units 12,000, 15,000, 20,000, 25,000, 30,000, and 40,000.

Solution:

B.E.P =

Fixed CostContribution per unit

=

Rs 2,50,000Rs 10 × (Rs 25 - Rs 15)

= 25,000 units

At production level of 25,000 units, the total cost will be Rs 6,25,000.

(Calculated as (25000 × 14) + 2,50000)

Statement showing Profit & Margin of safety at different level of production Break Even Sale = Rs 6,25,000 (25,000 x 25)
Production (In Units)	Total Sale (In Rs)	Total Cost (In Rs)	Profit (Sales - Cost) (In Rs)	Margin of safety (Profit/Contribution per unit) (In Units)
12000	3,00,000	4,30,000	-1,30,000
15000	3,75,000	4,75,000	-1,00,000
20000	5,00,000	5,50,000	-50,000
25000	6,25,000	6,25,000	(B.E.P)	(B.E.P)
30000	7,50,000	7,00,000	50,000	5,000
40000	10,00,000	8,50,000	1,50,000	15,000

The corresponding chart plotted as production against amount appears as follows: