How to Account for Interest in Break-even Point Calculation?

Break-even Analysis
Knowledge Center

Forum

New Topic

Deepti Namjoshi
HR Consultant, India

How to Account for Interest in Break-even Point Calculation?

Hi, I am clueless as to how to calculate BEP when other operating expenses such as interest are involved. How is interest considered in the formula for BEP calculation?

  Arrey Benedict
Management Consultant, Belgium
 

Interest in Break- even Point Calculation

Please my dear colleague, let me first of all repeat to you the formula to compute the BEP:
BEP = TFC / (SUP - VCUP)
Which means Total Fixed Cost divided by the Sales Price per Unit minus the Variable Cost per Unit.
Further cost analysis states that Total Cost (TC) = Total Fixed Cost (TFC) + Total Variable Cost (TVC).
- Normally all cost accruing from interest can be categorised under Fixed Costs, because investments on loans, mud-gages and depreciations, (which might generate interest to be paid) mostly constitute long-term criteria (of more than one year). So this automatically categorises all forms of interest costs under fixed expenditure or cost. Therefore calculating Break-Even-Point under an "interest payable" circumstance augment our fixed costs column.
- Nevertheless, all interests payable with a short term characteristic (less than 1 year) are instead to be categorised under variable costs.
Hope this would help your understanding. Thanks.

Start a new forum topic

 

More on Break-even Analysis
Summary
Forum
Break-even Point Example
Break Even Point Calculation of a Bank
Breakeven Formula for Services
Contribution in Break-even Point
Measuring Improvement in Break Even Point
BEP Calculation Possible with Multiple Products?
How to Deal with Owners Withdrawals in Break-even Analysis?
BEP Useful for New / Start-up Businesses
Could There Be 2 or even more Break Even Points?
Cost of Idle HQ Staff Included in Break-even Point Calculation?
Break-even Point Analysis when Material Prices Fluctuate
🔥Break-even Point as Maximum Revenue
How to Account for Interest in Break-even Point Calculation?
Best Practices
Time after Break-even Point?
How to Calculate BEP Without Price Given?
Break Even Point formula for a service industry
Break Even Analysis and Cost Benefit Analysis
Breakeven Point Calculation
Further Limitations of Break Even Analysis
Not enough revenues...?
Time for break even..
Special Interest Group

Are you interested in Break-even Analysis? Sign up for free

Notify your students

Copy this into your study materials:

and add a hyperlink to:

Link to this discussion

Copy this HTML code to your web site:

Break-even Analysis
Knowledge Center



About 12manage | Advertising | Link to us / Cite us | Privacy | Suggestions | Terms of Service
2021 12manage - The Executive Fast Track. V15.8 - Last updated: 23-4-2021. All names of their owners.