CALCULATION OF BREAK EVEN POINT AND PROFIT IN SMALL BUSINESS MANAGEMENT

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This below question has been repeated for years and it is the only calculation that is in Small Business Management.  I urge you to pay attention to it because it is so simple but can put students off too.

Here is it:

QUESTION:

The 2002/2003 final year student (business administration) have proposed a small business venture (bread making) in the university with the following parameters. 

a)    Fixed cost: 200,000.00

b)    Selling price per unit: 100.00

c)    Variable cost per unit N20.00 

 

REQUIRED:

1.    Determine the break-even point in quantity of the business.

2.    Calculate the profit of the business if 3,000 loaves of bread were produce and sold at the same prices.

SOLUTION:

1)    Break-Even – Point (BEP) in quantity

=        fixed cost_____

  Contribution per unit  

FIXED COST N200,000      

                            

Selling price            N100           

Less variable cost      N20

Contribution per unit   80

BEP (Unit) = 200,000 = 2,500 unit

                     80

BEP (Unit) = 2,500 unit

2)    To calculate profit on 3,000 loaves?

                                                N

Contribution (N80x 3,000)   =    240,000

Less Fixed cost                      (200,000)

Profit                                       40,000

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