How Do You Calculate A Break Even Point In Business?
Calculating the break even point of any business is basically a projection of what sales you need to achieve in order to make a profit. This article explains how it is calculated. The first step in calculating the break even point of your business is to work out what your total cost is. This is variable cost added to your total fixed costs. Variable costs are costs that increase or decrease as the level of production vary. Fixed costs are costs that stay the same whatever production levels are. Next you need to look at figures for both units sold, and what their individual prices are. Although break even is often calculated when a business starts up, and is used to estimate when profit will be made, it is also used yearly in many businesses. The actual formula for calculating break even is (Break Even = Fixed Cost / (Unit Price – Variable Unit Cost)). So the next thing to do is to work out your variable costs per unit. Lets say for example that you own a business selling bottles of sod
