FINANCIAL MATHEMATICS ASSIGNMENT

“BREAKEVEN POINT”

WRITTEN BY GROUP I:
1. Hanitriniony Nasandrata Aramandina (1842520225)
2. Irmadela Nindyadiasti Rizkika Fitriani (1842520104)
3. Oktania Er Amuritta (1842520145)
4. Rachmatya Khairunnisa Pratami (1842420041)
5. Randrianarimalala Haingo Julianah (1842520227)
6. Siti Alifatul Rochmawati (1842520095)

STATE POLYTECHNIC OF MALANG

ACCOUNTING DEPARTMENT
2018
 PREFACE

Thank you, authors goes to God Almighty, because for His blessings and mercy, the author
can complete the Financial Mathematics course material entitled "BREAK EVEN POINT" in
time.

This paper describes the Break Even Point starting from the Definition of a Break Even Point,
Types of Costs Based on Break Even, How to Determine Break Even Point (BEP) / Breaking
Point, BEP Graph, and the Application of BEP. Do not forget we would like to thank to Mr.
Drs. Sutrisno, M.Si. as our Lecturer in Financial Mathematics courses, and also to friends
who have provided support to us in completing this paper.

Our deepest hope, hopefully the preparation of this paper can be useful for all of us as well as
additional information about "BREAK EVEN POINT" for readers.

We realize that in compiling this paper it is far from perfect. Therefore, with an open heart
criticism and constructive suggestions for the perfection of the tasks of this paper. So this
paper we compile, if there are words that are less pleasing and there are many shortcomings,
we apologize profusely. May be useful. Thank you .

Malang, 11th November 2018

Authors
 CHAPTER I
INTRODUCTION

A. Background
Before producing a product, the company first plans how much profit it wants.
When running a business, of course, the production costs will be incurred, so the
break-even analysis can be known at the time and price level of what sales are made
does not make the business lose and is able to set sales at competitive prices without
forgetting the desired profit.
This is because the production cost is very influential on the selling price and
vice versa, so that the determination of the break-even point can be known the amount
of goods and the amount of prices on sales. Break even point analysis is often used in
other cases, for example in the analysis of financial statements.

B. Identification Problems
1. What is Break Event Point?
2. What are kind of costs?
3. What is Break Even Point by Unit?
4. What is Break Even Point by Rupiah?
5. What is the Break Even Point graph?
6. What are the apllications of Break Even Point?

C. Limitation of Problem
Based on the formulation of the problem above, it can be concluded that the
objectives of writing are as follows:
1. Understanding what Break Even Point is
2. Understanding the kind of costs
3. Understanding Break Even Point by Unit
4. Understanding Break Even Point by Rupiah
5. Understanding Break Even Point graph
6. Understanding the apllications of Break Even Point

D. Problem Formulation
Benefits in making this paper so that readers can know and add insight to the
readers who are subject to the material that has been made. After reading this paper
the reader is expected to increase knowledge.
 CHAPTER II
DISCUSSION

A. Definition

The break even point is the production level where total revenues equals total
expenses. In other words, the break-even point is where a company produces the same
amount of revenues as expenses either during a manufacturing process or an
accounting period. Since revenues equal expenses, the net income for the period will
be zero. The company didn’t lose any money during the period, but it also didn’t gain
any money either. It simply broke even.

B. Break Event Point Basic Calculation Component

a) Fixed Cost

This component is a fixed or constant cost if there is a production action or

even if the company does not produce. For example, if the floor space expenses,
manager's salaries, and janitorial services, do not change with unit volume, they
are fixed costs. Another examples of these costs are labor costs, machine
depreciation costs, etc.

b) Variable Cost

This component is a unit cost that is dynamic depending on the production

volume action. If the planned production increases, the cost variable will
definitely increase. The total variable cost can be "cost per unit" multiplied by
the unit volume. Examples of these costs are raw material costs, electricity costs,
etc.

C. Break Event Point and The Formula

a) BEP by Units

How many units of goods / services must be produced to break even point. For
example, production managers tend to focus on the number of units it takes to
recover their manufacturing costs. This is most common called the break-even
point in units. It calculates the number of units that need to be produced and sold
in a period in order to make enough money to cover the fixed and variable costs.
The break-even point in units equation is calculated by dividing the fixed costs by
the contribution margin per unit.
 Information:

 TR : Total Revenue
 TC : Total Cost
 TFC: Total Variable Cost
 P : Price
 V : Variable price per units

b) BEP by Rupiah
How many rupiahs are the sales value that must be received to break even
point. For example, Higher-level management might tend to focus on the actual
sales dollars instead of the number of units needed to recover costs. The break-
even point in dollars formula is calculated by dividing fixed costs by the
contribution margin ratio for the period.

FC
BEP = --------------
1 - VC
P

Where:

 FC : Fixed Cost
 P : Selling price per unit
 VC : Variable price per unit

D. Graph
E. Apllication

Problem and Solution:

PNG electric company manufactures a number of electric products. Rechargeable
light is one of the PNG’s products that sells for $180/unit. Total fixed expenses
related to rechargeable electric light are $270,000 per month and variable
expenses involved in manufacturing this product are $126 per unit. Monthly sales
are 8,000 rechargeable lights. Compute break-even point of the company in
dollars and units!
Answer:
a. Break even point in units:
Break even point in units can be computed by using either equation method
or contribution marginmethod. Both the methods are given below:
Equation method:
Sales = Variable expenses + Fixed expenses
$180Q = $126Q + 270,000
$180Q – $126Q = $270,000
$54Q = $270,000
Q = $270,000/$54
Q = 5,000 Units
Contribution margin method:
Break even point = Fixed expenses/Contribution margin per unit
270,000 / 54*
= 5,000 units
*$180 – $126

b. Break-even point in dollars:

Break-even point in dollars can be computed by multiplying break-even point in
units by sales price per unit as shown below:
5,000 units × $180
=$900,000
 CHAPTER III
FINAL

A. Summary
Break Even Point (BEP) can be interpreted as a point or situation where the
company in its operations does not get a profit and does not suffer losses. The purpose
of the break event point analysis is to find out on the sales or production volume how
much a company will achieve a certain profit.
Break Even Point analysis in general can provide information to the
leadership, how the pattern of the relationship between sales volume, cost / cost, and
the level of profit that will be obtained at a certain level of extension.
Break even analysis can be felt if the break even point can be maintained for a
certain period. This situation can be maintained if costs and selling prices are
constant, because the rise and fall of the selling price and costs will affect the break
even point.

B. Advice
If a company produces more than one type of product, the composition or
comparison between one product and another product (sales mix) must be fixed.
Because this condition can be maintained if costs and selling prices are constant,
because the rise and fall of the selling price and costs will affect the break even point.
So, the purpose of the break event point analysis is to find out on what sales or
production volumes a company will achieve a certain profit.
Thus the paper that we made, hopefully can be useful for the reader. If there
are suggestions and criticisms to be conveyed, please convey to us. If there is an error,
we can forgive and understand it, Thank you.
 REFERENCES

Firman Ilkha 2013, Pengertian Break Even Point (BEP), Zahir Blog, diakses tanggal 11
November 2018, https://zahiraccounting.com/id/blog/break-even-point-bep/.
Accounting for Management -, Exercise 1-(Target Profit Analysis, Break-Even Point),
accountingformanagement.org, diakses tanggal 11 November 2018,
https://www.accountingformanagement.org/exercise-1-cvapr/.
HfsBot 2016, Titik Impas, Wikipedia, diakses tanggal 11 November 2018,
https://www.accountingformanagement.org/exercise-1-cvapr/.