![]() ![]() ![]() This allows you to forecast and plan around external factors that might otherwise damage your business. Armed with a clear break-even analysis, you will know how unexpected obstacles like these will affect your break-even point and payback period. Break-even analysis depends on the following variables: Selling Price. Identifying break-even point also helps to reduce risk by factoring in both fixed and recurring costs so there should be no nasty surprises along the way.įinally, knowing when you break even in advance helps protect you should a product undersell or market conditions change. Break even point Operating expenses / Gross margin In most businesses, after a period of time, the gross margin percentage will stabilize and remain fairly constant. A firms break-even point occurs when at a point where total revenue equals total costs. If you have multiple routes available to you, analyzing each of them and determining their respective break-even points would help to decide which is the most favorable. Break-Even Point in Units: Total Fixed Costs divided by Contribution Margin per Unit Break-Even Point in Units. The formula for figuring that out is really easy once you have the break-even point in units. ![]() A break-even analysis provides a business with a clear idea of how much needs to be achieved in sales to avoid a loss and make a profit.Īs such, the results of your break-even analysis should help you determine how attractive a given opportunity is - whether that’s investing in a new product, acquiring a new department or business, or extending into new markets. Now let's try to figure out the break-even point in dollars. ![]()
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