Break-even Calculation
A company has fixed costs of €50,000, a unit selling price of €100, and a unit variable cost of €60.
- fixedCosts:
- 50000
- unitVariableCost:
- 60
- unitPrice:
- 100
Deep dive
The break-even point is the sales level where total revenue equals total costs, meaning there is neither profit nor loss. It is crucial for determining the viability of a product or service. Unlike gross margin, which measures profitability, the break-even point indicates the threshold for profitability.
Key formula
Fixed Costs / (Unit Price - Unit Variable Cost)
Real-world examples
Pitfalls to avoid
- Not including all variable costs.
- Ignoring changes in selling price.
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