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

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How to Account for Interest in Break-even Point Calculation?
Deepti Namjoshi, HR Consultant, India, Member
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? (...) Read more? Sign up for free

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  Interest in Break- even Point Calculation
Arrey Benedict, Management Consultant, Belgium, Member
  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.

   
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Break-even Analysis
Summary
Forum
Cost of Idle HQ Staff Included in Break-even Point Calculation?
🔥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..
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?
Break-even Point Analysis when Material Prices Fluctuate


Break-even Analysis
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