I.
Breakeven Point
A. Breakeven Point for Single Products
BEPunits (solve for Q) = 0 = (USP x Q) − (UVC x Q) − TFC
TFC
BEPunits =
USP − UVC
TFC
BEPunits =
UCM
BEPpesos (solve for USP x Q) = 0 = (USP x Q) − (UVC x Q) − TFC
TFC
BEPpeso =
CMR
BEPunits = Actual or Budgeted Sales in Units − MOSunits
BEPpesos = Actual or Budgeted Sales in pesos x (1 − MOS%)
B. Breakeven Point for Multi-Products
TFC
Composite BEP/BEPcombined units =
Weighted Avereage UCM
TFC
Composite BEP/BEPcombined units =
Weighted Avereage CMR
Weighted Average UCM
(UCM of A x No. of units per Mix) + (UCM of B x No. of units per Mix) + ⋯
=
Total number of units per Sales Mix
UCM x No. of units per Sales Mix
Weighted Average UCM = ∑
Total number of units per Sales Mix
Total Weighted CM
Weighted Average CMR =
Total Weighted Sales
Weighted UCM
Weighted Average CMR =
Weighted USP
CMR x Sales per product
Weighted Average CMR = ∑
Total Sales for the whole sales mix
C. Other Relevant Formulas
UCM = USP − UVC
CM = Total Sales − Total Variable Costs
Total VC
VCR =
Total Sales
UVC
VCR =
USP
CM
CMR =
Total Sales
UCM
CMR =
USP
Change in Profit
CMR =
Change in Sales
CMR = 1 − VCR
Legend:
BEPunits = Breakeven point in terms of number of units
BEPpesos = Breakeven point in terms of peso sales
USP = Unit Selling Price
UVC = Unit Variable Cost
TFC = Total Fixed Cost
MOSunits = Margin of safety in terms of number of units
Q = Quantity or Number of Units
UCM = Unit Contribution Margin
CM = Contribution Margin (Total)
CMR = Contribution Margin Ratio
VCR = Variable Cost Ratio
MOSpesos = Margin of safety in terms of pesos
II. REQUIRED SALES CONSIDERING DESIRED PROFIT
The break-even formula may be expanded to compute for the required sales (in units or in
pesos) to earn a desired amount of profit.
Relevant Formulas
1. Single Product
a. Desired Profit before Tax
TFC + Desired Profit
Required Sales in Units =
UCM
TFC + Desired Profit
Required Sales in Pesos =
CMR
b. Desired Profit after Tax
Desired Profit
TFC + [ 1 − Tax% ]
Required Sales in Units =
UCM
Desired Profit
TFC + [ 1 − Tax% ]
Required Sales in Pesos =
CMR
c. Desired Profit Ratio
TFC
Required Sales in Units =
UCM − Profit per unit
Profit per unit = USP x Proft Ratio
TFC
Required Sales in Pesos =
CMR − Profit Ratio
2. Multiple Products
a. Desired Profit before Tax
TFC + Desired Profit
Required Sales in Units =
Weighted Average UCM
TFC + Desired Profit
Required Sales in Pesos =
Weighted CMR
b. Desired Profit after Tax
Desired Profit
TFC + [ 1 − Tax% ]
Required Sales in Units =
Weighted Average UCM
Desired Profit
TFC + [ 1 − Tax% ]
Required Sales in Pesos =
Weighted CMR
III. MARGIN OF SAFETY
MOSunits = Actual or Budgeted Sales in Units − BEPunits
MOSunits = Actual or Budgeted Sales in Units x MOS%
MOSpesos = Actual or Budgeted Sales in Pesos − BEPpesos
MOSpesos = Actual or Budgeted Sales in Pesos x MOS%
MOSunits
MOS % =
Actual or Budgeted Sales in Units
MOSpesos
MOS % =
Actual or Budgeted Sales in Pesos
Profit Ratio
MOS % =
CMR
Profit
MOS % =
CM
1
MOS % =
DOL
BEPpesos
MOS % = 1 −
Actual or Budgeted Saes
III. DEGREE OF OPERATING LEVERAGE
CM
DOL =
EBIT or Income or Profit before Tax
% △ in EBIT
DOL =
% △ in Sales
Fixed Costs
DOL = 1 +
Income or EBIT
1
DOL =
MOS %
IV. INDIFFERENCE POINT
Indifference Point in Units (solve for X) = CM1 (X) − FC1 = CM2 (X) − FC2
( FC of 1 − FC of 2 )
Indifference Point in Units =
( UCM of Alternative 1 − UCM of Alternative 2)
