Break-even point
WHAT IS IT ?
The break even point is the production level where total revenues equals total expenses. In other words, the break-even point is where a company produces the same amount of revenues as expenses either during a manufacturing process or an accounting period.
CALCULATION:
EXAMPLE:
The selling price of the product is 20 Euros, variable costs are 12 Euros, and the fixed costs of the company amount to 3,200,000 Euros. Determine the Break-even point.
Q = 3,200,000 / (20 - 12)
Q = 400,000
Thus, to break even, 400,000 units need to be produced.
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