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BEP for Bidding a Chit

Dear Sir,

I am paying an amout of Rs. 10000 Per month in a chit fund company. This is a 25 Months chit with an amount of Rs 2.5 Lakhs. 2% is the commision. In the 11 th month, I won the chit and received net amount of Rs 1.95 Lakhs. I would like to know whether I am profited of lost by bidding this chit. If so by how much amount.

Pls. let me know the factors to be considered while participating in bidding and lifting the chit. How to know BREAK EVEN POINT while bidding, considering normal bank interest rates. Can you pls. explain with calculations in detail with an example, assuming that I am an employee and will not invest in any business.

Thanks and regards.

D.  Sampath Kumar from India

D.  Sampath Kumar! First of all, I am telling BEP is using where you selling any product. If you want to know the scheme is profitable or not after comparing it from normal rate of interest. You should calculate ROI in this chit scheme and then compare it with normal interest on same amount.

First of All you have Find return on Chit Fund = 195000 -110,000

= Rs. 85000

Now, you have to find return with normal interest rate on the amount of  Rs. 1,10,000 and then compare.

But if you want to know the break even point basics. I can explain you in very simple words. Break even point is that point which gives amount of sales where we will get no profit no loss. At this point, our total revenue will equal to total cost. It means, if we calculate this point, we can survive our business. You can find the quantity of your sales where you will receive no profit and no loss.

Quantity of  sales BEP = Total fixed cost / sales price - variable cost price

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Vinod Kumar ( Educator )

Vinod Kumar ( Educator ) is founder of this website

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