Definition of Break Even Point
The breakeven point is a point at which the business is making neither profit nor loss. At the break-even point, sales revenues are exactly equal to the total cost. Total costs include fixed cost and variable cost. To calculate the break-even point, we need to calculate the unit contribution margin.
Contribution margin per unit is calculated deducting variable cost per unit from sales price per unit. Then the fixed cost is divided by the contribution margin per unit to calculate the break-even point. Here is the formula for breakeven point:
Example of Breakeven Point:
Assume that a bakery has a fixed building rent of $15000, and it sells loaves of bread for $10 each that has a variable cost of $6 each. The break-even point will be calculated as follows
View More Corporate Finance Definitions
Related Questions of Corporate Finance
Mexican Motors’ market cap is 200 billion pesos. Next year’s free
Lohn Corporation is expected to pay the following dividends over the next
Use the following income statement and balance sheet for Jim’s Espresso:
You are looking at an investment that has an effective
Bowdeen Manufacturing intends to issue callable, perpetual bonds with annual coupon
Why is it that real options must have positive value?
Shadow Corp. has no debt but can borrow at 8 percent
Hanmi Group, a consumer electronics conglomerate, is reviewing its annual
Schwert Corp. shows the following information on its 2012 income statement
Aguilera Acoustics, Inc. (AAI), projects unit sales for
Show All
