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Break even point (BEP) is the most important data to all company. Here is the simple explanation on how to read the BEP chart. From the chart we can plan the BEP easily.
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Cost
Output
BEP start with 2 important axes (line). Cost and Output
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Cost
Output
Next, is the COST line. The most important line is the
Total Fixed Cost (FC) line. You need to calculate and identify your FC. Pls be precise as u
can.
Fixed Cost
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Fixed Cost
Cost
Output
FC line is a straight line. Why? because how much the output u made, the FC will
not change = increase@decrease.
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Cost
Output
Sample =Output 1000units : FC RM100Output 500units : FC RM100Output 2000units : FC RM100
Fixed Cost
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Cost
Output
Next is, Total Cost line. (FC + Variable Cost). The TC line will move upward because it is a
cumulative cost for every unit of output.
Fixed Cost
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Cost
Output
Next is, Total Cost line. (FC + Variable Cost). The TC line will move upward because it is a
cumulative cost for every unit of output.
Fixed Cost
Total Cost
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Cost
Output
As mention before, FC is static, so why Total Cost is
keeps increasing? The answer is : The Variable Cost (VC) of
each outputs is not static Total Cost
Fixed Cost
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Cost
Output
Sample =Output 100units : VC RM100Output 50units : VC RM25
Output 200units : VC RM200Total
Cost
Fixed Cost
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Total Cost
Fixed Cost
Cost
Output
Now, lets see where is FC and VC located.
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Total Cost
Fixed Cost
Cost
Output
Now, lets see where is FC and VC located.
Variable Cost
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Total Cost
Fixed Cost
Cost
Output
Now, lets see where is FC and VC located.
Variable Cost
Fixed Cost
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Cost
Output
Next, Lets draw Sales line. It is cumulative amount,
therefore the line will always be uptrend. Start with zero (0) value. The degree of sales
line will depend on sales Total
Cost
Fixed Cost
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Cost
Output
Next, Lets draw Sales line. It is cumulative amount,
therefore the line will always be uptrend. Start with zero (0) value. The degree of sales
line will depend on sales
Sales
Total Cost
Fixed Cost
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Total Cost
Fixed Cost
Cost
Output
Sales
We can see three (3) sales conditionNow we have all the basic
Line to locate the BEP point. Then, where is BEP?
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Total Cost
Fixed Cost
Cost
Output
Sales
Sales at BEP
The POINT where Sales Line met/cross with Total Cost Line MEANS that
TOTAL SALES is Equal to TOTAL COST = NO
PROFIT is generated
We can see three (3) sales conditionNow we have all the basic
Line to locate the BEP point. Then, where is BEP?
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Total Cost
Fixed Cost
Cost
Output
Sales
Sales at BEP
Sales at PROFIT
Sales at LOSS
The POINT where Sales Line met/cross with Total Cost Line MEANS that
TOTAL SALES is Equal to TOTAL COST = NO
PROFIT is generated
Sales ABOVE Total Cost
Sales BELOW Total Cost
We can see three (3) sales condition
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Total Cost
Fixed Cost
Cost
Output
Sales
Sales at BEP
Sales at PROFIT
Sales at LOSS
The POINT where Sales Line met/cross with Total Cost Line MEANS that
TOTAL SALES is Equal to TOTAL COST = NO
PROFIT is generated
Sales ABOVE Total Cost
Sales BELOW Total Cost
Based on the above BEP charts, now u can easily see and verify either your SALEs is good or bad. I believe all businessman want to make profit not vice versa. The
minimum sales off coz will be at BEP point.Sunday, December 15, 13
Sales at BEP
Sales
Total Cost
Fixed Cost
Now, we can say that the lower BEP is the better for
the company.
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Sales
Total Cost
Fixed Cost
Sales at BEP
How to lower our BEP? firstly, we can reduce our FC which will reduce the Total Cost.
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Sales
Total Cost
Fixed Cost
Sales at BEP
Or we can increase the sales. Off coz its need correct strategies and approaches
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Total Cost
Fixed Cost
Cost
Output
Sales
Sales at BEP
Sales at PROFIT
Sales at LOSS
The POINT where Sales Line met/cross with Total Cost Line MEANS that
TOTAL SALES is Equal to TOTAL COST = NO
PROFIT is generated
Sales ABOVE Total Cost
Sales BELOW Total Cost
Thats all from me. Tq for watching. Pls email to [email protected] for
any info
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