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mcknoep
May 5, 2008, 07:53 AM
If breakeven analysis is sales minus fixed and variable expenses from the P&L, why does the templet I downloaded include principal portion of debt? This is a balance sheet item - it never hits P&L? Am I missing something?

tomterm8
May 5, 2008, 08:10 AM
If breakeven analysis is sales minus fixed and variable expenses from the P&L, why does the templet I downloaded include principal portion of debt? This is a balance sheet item - it never hits P&L? Am I missing something?

You are mixing up several concepts. A break even analysis shows the point at which a product will break even by value, so it is a chart that looks like introduction to break-even analysis (http://tutor2u.net/business/production/break_even.htm)

debt itself is not included in a break even analysis, however, the cost of servicing and repaying debt would be, generally as a fixed cost. Remember, we need to borrow £X in order to buy the equipment we need to make the product.