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

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Break-even Analysis Knowledge Center

Forum 3 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? X Welcome to the Break-even Analysis forum. The topic being discussed here is: "How to Account for Interest in Break-even Point Calculation?". Please sign up now to read all responses and to join this discussion yourself. It's free. Log in About 12manage | Opinions   Comments Rating   2 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.   Leave a comment Share your knowledge or experience

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Break-even Analysis Knowledge Center

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