The contribution margin is obtained with the following formula:Ĭontribution margin = product price - variable costs The above formula can also be expressed using the contribution margin:īreak Even Point (sales) = Fixed costs / contribution margin The break-even point thus indicates how many units must be sold in order to cover the costs. The turnover per unit is the selling price of the product. The fixed costs are independent of the number of units sold, while the variable unit costs are dependent on this. Break Even Point in units: formulaīreak Even Point (unit) = Fixed costs / (Revenue per unit - variable costs per unit) There are two ways to calculate the break-even point. The break-even point is the point where the two curves intersect. The same diagram is then used to draw the revenues that are achieved through the sale of a certain sales volume.
On the x-axis (horizontal axis) you plot the sales volume (how many products are sold) and on the y-axis (vertical axis) you plot the total cost of producing a given quantity of product. To determine the break-even point graphically, the total cost curve of a product over time is plotted in a diagram. The break-even point can be determined both graphically and mathematically.
From the point at which the break-even point is exceeded, the company makes a profit through the sale. This means that the break even point is exactly £0 in total. for the production of a product) are equal to the revenue generated by the sale. The break-even point indicates the point at which the costs (e.g.
#BREAK EVEN POINT FORMULA FOR UNITS HOW TO#
We explain in this article with the help of formulas and an example how to calculate the break-even point and how the break-even point analysis helps companies.
It provides information about the sales volume from which a company makes a profit with the sale of a product. The break-even point is an important key figure in the cost-benefit calculation of a company.
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