Then you need to divide the total cost by the total of all units to get your variable cost unit. So, to calculate the break even point, you need to add up all the fixed and variable costs incurred for the product or service. Total Costs = (Fixed Costs + Variable Costs) x Number of Units The formula for the break-even point equation is: This equation is a method of calculating the point at which sales revenue and cost revenue are equal. The break even point is often presented in the form of an equation. ![]() Therefore, it is important to regularly review and adjust the break even point.īreak Even Point Calculation: The Break Even Point Formula The break even point is not always easy to calculate and can also change over time. It is also a useful tool for pricing, as it tells the company how much it needs to charge for its products or services in order to make a profit. In either case, the break-even point helps minimize a company's financial risk because it tells the company when it will begin to make a profit. Or a service provider might calculate the break even point to find out how many customers it needs to cover its costs. For example, a manufacturer might calculate the break even point to find out how many units of the product it needs to sell to cover the cost of the manufacturing process. There are different types of break even points that can be relevant for different areas of a company. It simply means that the company has covered its expenses and is now starting to make a profit. When a company reaches its break even point, it does not necessarily mean that it is now profitable. In other words, it is the point at which revenues equal expenses. The break-even point (BEP) is the point at which a company has no profit and is no longer making a loss.
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