The break-even point allows you to anticipate when you will start to make a profit and how much volume of product you will have to sell to get out of the deficit when starting an economic project how to calculate .
This knowledge enables you to gain some predictability for making strategic decisions. For example, if your company always reaches its break-even point in the last days of the month, you may need to review some of the variables to find out why this happens, so that you can design strategies to make your business more profitable.
Another advantage of using this formula is that you have greater certainty about how many units you need to sell to reach the break-even point. But how do you do this? Below, we will see how to
do the math so you can learn how to calculate
Break-even point of a company: example of how to calculate it
This formula will allow you to know how many units your company will need to sell to reach the break-even point and what amount it will need to earn to reach it, respectively.
For clarity, let’s apply the above formula to a concrete example:
Let’s assume that the rent for the Our company received $1,250 in sales. And the cost of goods greece telegram phone number list sold was $250. Namely:
The formula above tells us that to reach the break-even point, we must sell an amount of $31,250. If we multiply 25 units by the sales price, we will arrive at the same number.
An important clarification is that if we take the unit cost (i.e. per unit) we must also take the sales price per unit.
Other data that can
By calculating the everything you need to know about customer expectations to improve your company’s sales break-even point we can how to calculate also obtain other complementary data, such as:
Fixed cost absorption percentage: By dividing the break-even point by sales revenue, and then multiplying that result by one hundred, we will obtain the percentage of
sales that we will need to cover our costs
We have seen what the break-even point is, how it is calculated and an example to illustrate it better. Thus, we learned that knowing what a company’s break-even point is allows us to manage your resources, make strategic how to calculate decisions and adjust the final price of your product or service.
We are faced with a simple and necessary aleart news mathematical equation for any business that wants to sustain itself over time.
If you want to know what other actions you should take into account to make your company more profitable, we invite you to the Zendesk blog where you will discover other useful tools and resources.
