Breakeven Analysis in
Breakeven analysis in Excel using
like contribution margin, fixed costs and variable cost is quick and
A company is supposed to break even when the total expenses equals the
total revenues. It can also be defined as the point where the net
profit is zero, i. e. the company has neither made any profits nor
incurred any loss.
We have also calculated the
using: break even point = fixed cost / contribution margin per unit
And contribution (per unit) =
(per unit) - variable cost (per unit)
Terms used in the
The amount of money charged to the customer for each unit of a product
Number of units of the product projected to be sold over a specific
period of time.
Variable Unit Cost:
Costs that vary directly with the sales and production of one
additional unit. Example, commission on sales.
The sum of all costs required
to produce the
first unit of a product. Example,
The product of unit sales and variable unit cost.
(Unit Sales * Variable Unit Cost )
The sum of the fixed cost and total variable cost for any given level
of production and sales.
(Fixed Cost + Total Variable Cost )
The product of expected unit sales and unit price.
(Unit Sales * Unit Price )
Profit (or Loss):
Total Revenue - Total Costs
Break even analysis depends on the
The fixed production costs for a
The variable production and sales
costs for a
The product's unit price.
The product's expected unit sales.
Another way to look at the
break-even point is
that it is the point at which your product stops costing you money to
produce and sell, and starts to generate a profit for your company.