BREAK EVEN ANALYSIS

A Business Case Analysis

Presented to the Faculty of Accountancy Business and Management Strand

Senior High School Department

Kidapawan City National Highschool

Roxas ST., Kidapawan City

In partial Fulfillment of the Requirements for the Subject

BUSINESS MATHEMATICS

ERDANLOVE C. DIEL

Teacher

MARLO JUSTIN M. ESPADERA

CAMILLE ROSE L. BANADOS
JAYRON L. SALILAGUIA
FRANCIS ALEX R. ALVAREZ
JANELLE G. GALLARDE
ARCY JESSA D. TOGONON
LEJEAN SY O. CORNEJO
EUNICE ALYSSA LOSIS
SHINE M. CAGUD
I. Statement of the Problem

ABM Innovations Inc. currently sells a product for P 120 per unit. The variable cost are
P 40 per unit, and 100,000 units are sold monthly and a profit of p 300,000 is realized
per month. A new design will increase and variable costs by 20% and fixed cost by
10%b but sales will increase to 120,000 per month.

(a) at what selling price does the company will have to break even, and

(b) if the selling price is to be kept same (P120/unit) what will the monthly profit be?

II. Objectives of the Study

This study aims to determine following:

a) the selling price that the company will have to break even

b) the profit monthly if the selling price is still the same

III. Analysis and Conclusion

Solution:

4,000,000 + 300,000 = 4,300,000

12,000,000 – 4,300,000 = 7,700,000

Sales (100,000 ● 120) = 12,000,000

Cost :

Variable (100,000 ● 40 ) = 4,000,000

Fixed 7,700,000

Profit 300,000

a) Given :

VC = 40 ● 1.20 % = 48/unit

FC = 77 ● 1.10 % = 84.70/unit

Sales : 120,000 units

Solution :

Variable Cost: 120,000 ● 48 = 5,760,000

Fixed Cost : 120,000 ● 84.70 = 10,164,000

Total Cost 15,924,000

Divided by units 15,924,000 ÷ 120,000 =

Selling price 132.70

b) Sales (120,000 ● 120) = 14,400,000

Variable Cost (120,000 ● 48) 5,760,000

Fixed Cost (120,000 ● 84.70) 10,164,000

Loss 1,524,000
Conclusion:

After we solve for the selling price we can say that the selling price to get the break
even point is 132.70 because if the selling price that we will use is 120 there is a loss
and for the second solution there is a loss of 1,524,000 and there’s no profit for that
month if the selling price is still the same.