break-even point analysis

break-even point analysis

📍What is the break-even point?

is a point calculated from an accounting and financial formula that shows where a seller can make a product without a loss but not a profit from the sale. If asked how important it is for the business To find break-even point, business operators know how much to sell at least so they don't lose, leading to the minimum sales planning that must be achieved before finding ways to increase profits.

📍What are the factors used to calculate the break-even point?

- selling price per unit It is the price that has already been set and can be sold out.

- variable cost per unit It is the cost that has changed to production, whether it is raw materials, labor and various expenses.

- Total fixed cost The cost is the same amount every time in production.

The formula for calculating the break-even point

Calculate the amount of units sold that makes it break even.

Break-even point (number of units) = total fixed expenses ÷ (unit service price - variable cost per unit)

The break even point can also be used to calculate profit. It can be done by adding the profit that the operator wants to the fixed cost, then it will know the sales that the desired profit has been achieved.

📍The formula for calculating the break-even point plus the desired profit

Break-even point (number of units) = (total fixed expenses + desired profit) ÷ (unit service price - variable cost per unit)

Obviously, break-even analysis improves planning as you know where to start and avoid failure. Finding break-even points is essential to help. Management that should not be overlooked

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