Breakeven AnalysisQuantitative Tool for Evaluating
AlternativesBreakeven Analysis Organizations face Variables Costs
(VC). Variable Costs (VC) cange !it te volu"e of #ro$uction% e.g.
cost of "aterials or labor. Organizations face &i'e$ Costs
(&C). &i'e$ Costs (&C) $o not cange !it volu"e of
#ro$uction an$ !oul$ be incurre$ even if no #ro$ucts !ere
"anufacture$ or sol$% e.g. (tilities% A$vertising an$ )ales
E'#enses% *acinery. +rice (+) #er (nit is te revenue obtaine$ #er
unit. (nit Contribution or *argin #er (nit is te $ifference bet!een
#rice #er unit an$ variable cost #er unit% i.e. (nit Contribution ,
+ #er unit - VC #er unit Breakeven volu"e is foun$ by $ivi$ing te
total fi'e$ costs by te unit contribution Breakeven Volu"e ((nits)
, Total &i'e$ Costs(nit Contribution
