22.4. Break-even Point Formulas

Try these first

1. 1.

   What is the formula for calculating the break-even point in units?

   Hint

   Think about how fixed costs and variable costs relate to each other.

2. 2.

   If selling price per unit is ₹300 and variable cost is ₹200, what is the contribution per unit?

   Hint

   Remember to subtract the variable cost from the selling price.

3. 3.

   What is the formula for break-even in units?

   • A) Fixed Costs / Selling Price
   • B) Fixed Costs / (Selling Price - Variable Cost)
   • C) Fixed Costs + Variable Costs

   Hint

   What do you divide to determine how many units you need to sell?

4. 4.

   The contribution margin ratio (CMR) is calculated by dividing which two numbers?

   Hint

   What two values do we need to find the ratio?

5. 5.

   A software as a service (SaaS) company has fixed costs of ₹80,000, a selling price per subscription of ₹400, and variable costs of ₹250 per subscription. Calculate the break-even point in units and sales value.

   Hint

   Calculate units first, rounding as needed, then convert to sales value.

6. 6.

   If a company expects to increase its fixed costs by ₹25,000 next year but also anticipates a 10% rise in selling price while keeping variable costs the same, how will it affect the break-even point?

   Hint

   Consider how both changes affect profitability.