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Math Help - Break even

  1. #1
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    windsor ont cAN
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    Break even

    Beta Inc. Has based its budget forecast for next year on the assumption it will operate at 90% of capacity. The Budget is

    Sales revenue = $18 000 000
    Fixed Costs = $10 000 000
    Total Variable Costs = $6 000 000
    Total Costs = $ 16 000 000
    NET INCOME = 16 000 000

    a) At what percentage of capacity would Beta Break Even

    at break even point , NI = 0 Ni = ( S - VC ) x - FC

    0 = ( 1 200 000 - 6 000 000 )x - 10 000 000

    0 = -4 800 000x - 10 000 000

    x = -2.0833...

    i'm getting confused after that

    Question: is Sales Revenue the same thing as total revenue?
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  2. #2
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    windsor ont cAN
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    edited

    Beta Inc. Has based its budget forecast for next year on the assumption it will operate at 90% of capacity. The Budget is

    Sales revenue = $18 000 000
    Fixed Costs = $10 000 000
    Total Variable Costs = $6 000 000
    Total Costs = $ 16 000 000
    NET INCOME = 2 000 000

    a) At what percentage of capacity would Beta Break Even

    at break even point , NI = 0 Ni = ( S - VC ) x - FC

    0 = ( 1 200 000 - 6 000 000 )x - 10 000 000

    0 = -4 800 000x - 10 000 000

    x = -2.0833...

    i'm getting confused after that

    Question: is Sales Revenue the same thing as total revenue?[/quote]
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  3. #3
    Junior Member
    Joined
    Jun 2009
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    49
    Breakeven occurs when Revenue exactly equals total costs. Equivalently, BE is when Revenue, minus Variable Costs, exactly equals Fixed Costs.

    From the given info, you can see that Variable Costs are expected to be 1/3 of Revenue. It's usually expected that this proportionate relationship between Revenue and VC will hold over different Revenue levels.

    Thus, the breakeven statement can be put as, BE occurs when Revenue, less 1/3 of Revenue, exactly equals Fixed Costs.

    So what Revenue amount satisfies the notion that 2/3 of the Revenue equals 10M?

    And finally, if 18M of Revenue is 90% of capacity, what % of capacity does the BE Revenue represent?
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