![]() ![]() To calculate the break-even point in terms of the number of units needed to sell, divide total fixed costs by the difference between the unit price and variable costs per unit:īreak-even point in units = fixed costs / (sales price per unit – variable costs per unit) Break-even point in sales Here are the two formulas you can use to calculate the break-even point: Break-even point in units You can use this formula to decide if cutting costs is necessary or if you require alternative ways to generate revenue. Business owners use this formula to determine when their company can become profitable. Once you make sales above the amount needed to reach the break-even point, you make a profit. Related: 10 Key Entrepreneurial Skills You Need to Start a Business What is the break-even formula?īy using the break-even formula, you can determine how much to sell to equal the costs of production. In this article, we define the break-even formula and explain the two types, review how you can use the formulas to calculate the break-even point of a business for both sales and units, explore the ways to use this value, discover the importance of a break-even analysis, and provide examples of calculating the break-even point to help you make your own calculations. Learning more about the break-even formula can help you gain clarity about fixed and variable costs to make necessary business and financial decisions. You can use this formula to determine where the costs of a product or service is equal to the revenue it generates and maximize the company's profits. The break-even point (BEP) is a financial calculation to determine at which point in the production process the total revenue and total expenses are equal.
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |