ENTREPRENEURSHIP

DEVELOPMENT
BREAK EVEN ANALYSIS(BEP) or
COST VOLUME PROFIT
ANALYSIS(CVP)

GROUP MEMBERS
AALAP
AJITH
ASHFAQ
This presentation covers
• Example of Break-Even in terms of number of units
• What it means
• How it is used
• Specific terms to remember
• The break-Even formula
• How to calculate Break-Even
BREAK-EVEN ANALYSIS(B.E.P)
Break Even Analysis means or it refers to that system determining the
level of activity where total cost is equal to total sales(covering all costs
but experiencing no profit or no loss)

USED TO:-
• Calculate the number of units that must be sold to Break-Even
• Calculate amount of sales that must be made in terms of money to
cover all the costs
Terms to Remember
• Selling Price- The price of which you are selling your product
• Variable costs (Costs of Goods Sold)-costs that are directly
incurred in order to make each sale & which vary with output. ie Raw
materials, if you are selling books the cost of printing and paper cost
for each book
• Contribution- The difference between the selling price and
variable cost
• Fixed cost- Cost that do not vary with output. ie Rent, Wages
Break-Even (units)
•
How to Calculate Break-Even
You need to know two vital figures
• Contribution
(sale price-variable cost)
• Fixed cost
Example #1
A business of selling books

• Selling price = 100 rs

• Variable cost = 20 rs
• Fixed costs = 2000 rs
Break-Even (units)
•
 Break-Even(units)

𝒇𝒊𝒙𝒆𝒅 𝒄𝒐𝒔𝒕𝒔 2000𝑟𝑠

• =
𝒄𝒐𝒏𝒕𝒓𝒊𝒃𝒖𝒕𝒊𝒐𝒏 80𝑟𝑠
= 25units

• 25 Units of books are needed to be sold to

cover the costs of running the business(break-
even point)
We have covered
• Example of Break-Even in terms of number of units
• What it means
• How it is used
• Specific terms to remember
• The break-Even formula
• How to calculate Break-Even
• Break-even analysis(BEP) is an important factor
in assessing the profitability of the firm/project

• It helps an entrepreneur to plan the volume of

his sales
• It is especially useful in manufacturing activity
• Vital tool for planning a new project as well as for planning a new
activity for an existing unit
• Mainly used by proponents and banks/finance providers
• From the point of view of a banker/finance provider
The project should achieve BEP within a reasonable
time from the commissioning of the project. Usually if the
time required is more than 3-4 years then the project is not
considered as a viable one
Thank you
References
• The Dynamics Of Entrepreneurial Development And
Management BY VASANT DESAI
• ENREPRENEURSHIP DEVELOPMENT BY JASMER SINGH SAINI