What are some examples of break-even analysis?

What are some examples of break-even analysis?

Break-even analysis helps businesses determine when they will start to make a profit. For example, if a company sells a product for $50 and has fixed costs of $10,000 and variable costs of $30 per unit, they need to sell 500 units to break even.

Can you explain how to calculate the break-even point?

Sure! The break-even point can be calculated using the formula: Break-even Point (in units) = Fixed Costs / (Selling Price per Unit - Variable Cost per Unit). In our previous example, it would be 10,000 / (50 - 30) = 500 units.

What if my fixed costs change?

If your fixed costs change, you would need to recalculate your break-even point using the new fixed costs in the formula. For instance, if fixed costs increase to $12,000, the new break-even point would be 12,000 / (50 - 30) = 600 units.

Can you give me a real-world example?

Absolutely! A coffee shop might have fixed costs of $5,000 per month. If they sell coffee for $4 and the variable cost per cup is $1, they would need to sell 1,250 cups to break even each month.