Therefore, the concept of break-even point is as follows: The break-even analysis is important to business owners and managers in determining how many units (or revenues) are needed to cover fixed and variable expenses of the business. Therefore, the break-even point is often referred to as the “no-profit” or “no-loss point.” At the break-even point, a business does not make a profit or loss. From 0-9,999 units, the total costs line is above the revenue line.įree Cost-Volume-Profit Analysis TemplateĮnter your name and email in the form below and download the free template now!Īs illustrated in the graph above, the point at which total fixed and variable costs are equal to total revenues is known as the break-even point. ![]() Likewise, if the number of units is below 10,000, the company would be incurring a loss. Note that the blue revenue line is greater than the yellow total costs line after 10,000 units are produced. When the number of units exceeds 10,000, the company would be making a profit on the units sold.At this point, revenue would be 10,000 x $12 = $120,000 and costs would be 10,000 x 2 = $20,000 in variable costs and $100,000 in fixed costs. The break even point is at 10,000 units.If the company sells 10,000 units, the company would incur 10,000 x $2 = $20,000 in variable costs and $100,000 in fixed costs for total costs of $120,000. For example, if the company sells 0 units, then the company would incur $0 in variable costs but $100,000 in fixed costs for total costs of $100,000. The yellow line represents total costs (fixed and variable costs). ![]() For example, selling 10,000 units would generate 10,000 x $12 = $120,000 in revenue.
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |