Break Even Point

Break even point equation

The Break-Even Point helps to decide how many products or services a business must sell to cover all costs and record profit. To calculate this, the fixed costs must be known. The Fixed Costs are the reoccurring necessary business operating costs which encompass the salaries, rent, etc.

Next is the Variable Cost per Unit. It's the amount of manufacturing a product or service per unit.  And the last one sales price. The Sales Price is the amount a unit of product or service sells for.

To calculate this, use this simple method: (Fixed Costs / Sales Price) – Variable Cost Per Unit.

It means you'll divide Fixed Costs by Sales prices, then subtract the result from the Variable Cost Per Unit. The final result shows the volume to be sold to cover