MATS-Break-Even Analysis

Cost-Volume-Profit (CVP) analysis is crucial in a manufacturing company in helping with long-term decision making.

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Break-even is the point where a company produces and sells enough units to cover its budgeted profit.

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Contribution is concerned with both the direct and indirect costs per unit.

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Margin of safety is calculated by taking the break-even sales units off the budgeted sales units.

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To calculate how many units a company has to make in order to achieve a target profit it would use the following formula: (Target profit + fixed costs) ÷ contribution per unit.

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