Calculating the break-even point
To avoid making a loss every business must at least break-even by achieving a level of sales that covers its total costs. But what level of sales is necessary to break-even? To explore the concept of break-even, we need to define some basic terms:

Fixed costs: Costs that do not vary with output or sales e.g. managers salaries, rent and rates on business premises. Variable costs: Costs that vary with the quantity produced or sold e.g. costs of materials and wages Total cost: Fixed costs plus variable costs for any possible level of output. Sales revenue: The price of the product multiplied by total sales Profit: The difference between total revenue and total cost (where revenues are higher than costs Loss: The difference between total revenue and total cost (where costs are higher than revenues)

Selling very small quantities of a product usually results in a loss as any profit fails to cover the overheads or fixed costs of the business. For example, suppose that the fixed costs (eg management salaries, rent, business rates) for a firm making bookshelves are £1 000 per month. Assume that the varaible cost (materials and labour) for each set of shelves is £30. This means that £20 is generated by each sale (called the 'contribution') towards paying the fixed costs. It follows, therefore, that no profit can be made until 50 bookcases have been sold and the fixed costs are covered (50 X £20). The sales level at which fixed costs are covered is the point at which the firm breaks even and is called the break-even point. There are two simple approaches to identifying the break-even point for a business: 1. Constructing break-even chart showing:

sales revenue at different levels of output
fixed costs at different levels of output
total costs at different levels of output

The break-even point occurs where total cost = total sales revenue. 2 Calculating the contribution for each unit...

...The break-evenpoint for a product is the point where total revenue received equals the total costs associated with the sale of the product (TR=TC). [1]A break-evenpoint is typically calculated in order for businesses to determine if it would be profitable to sell a proposed product, as opposed to attempting to modify an existing product instead so it can be made lucrative. Break...

...Definition of BreakEvenpoint:
Breakevenpoint is the level of sales at which profit is zero. According to this definition, at breakevenpoint sales are equal to fixed cost plus variable cost. This concept is further explained by the the following equation:
[Breakeven sales = fixed cost + variable cost]
The break...

...BREAK-EVENPOINT
A company's break-evenpoint is the amount of sales or revenues that it must generate in order to equal its expenses. In other words, it is the point at which the company neither makes a profit nor suffers a loss. Calculating the break-evenpoint (through break-even analysis) can provide...

...fluctuation in EBIT.
15-4. Break-even analysis, as it is typically presented, categorizes all operating costs as being either fixed or variable. Based upon this division of costs, the break-evenpoint is computed. The computation procedure for the cash break-evenpoint omits any noncash expenses that the firm might incur. Typical examples of noncash expenses include...

...#3
Break-Even Analysis
Rob Holland Assistant Extension Specialist Agricultural Development Center
September 1998
One of the most common tools used in evaluating the economic feasibility of a new enterprise or product is the break-even analysis. The break-evenpoint is the point at which revenue is exactly equal to costs. At this point, no profit is made and...

...Break-evenpoint is that point at which there is neither profit nor loss. It is at point costs are equal to sales. It is otherwise called as balancing point, neutral point, equilibrium point, loss ending point, profit beginning point etc. After BEP is achieved, all the further sales will contribute to profit.
At BEP, Sales – Variable cost = Fixed...

...Contribution Margin and BreakEvenPoint
by
ACC 202
Trident University
July 22, 2011
Contribution Margin and BreakEvenPoint
I’m going to discuss Contribution margin and what it is and how it relates to companies and profits. Contribution margin is the amount remaining from sales revenue after variable expenses have been deducted. It is the amount available to cover fixed expenses such as...

...to use?
b) Break-Even Analysis – Systems of Equations Application Problem
Suppose a company produces and sells pizzas as its product. Its revenue is the money generates by selling x number of pizzas. Its cost is the cost of producing x number of pizzas.
Revenue Function: R(x) = selling price per pizza(x)
Cost Function: C(x) = fixed cost + cost per unit produced(x)
The point of intersection on a graph of each function is called the...