How to calculate the break-even point ?

How to calculate the break-even point ?

Definition and clear knowledge of the break-even point is important for each businessman for many reasons.First, he must know how the amounts received on account of the company, begins his personal profit.Secondly, the knowledge of the break-even point can determine the threshold below which you can not fall in the price of goods at the sales.To avoid losses, the entrepreneur, the business owner should know how to calculate the break-even point.

What is the break-even point

Break-even point - is the amount that makes the company capable to cover all fixed and variable costs, ie all the costs of the enterprise.It includes a permanent salary, rental space, some resources, etc.. For variable costs include the purchase of raw materials, unforeseen expenses, as well as all costs, the amount of which varies from month to month.If the company is able to pay without any problems on the invoices, it is even.The amount that is required for this is called the break-even point.

Break-even point (chart)

Knowledge of how to determine the break-even point, do not always make it possible to calculate this figure alone in real life.As a rule, companies are taking this work of economists.But about it can find and himself.That's the easiest way.Plot a profit for the month.The horizontal axis of the count of the month, and the vertical delay money coming into the account.Then take the account on which the payment is made the entire month and build a second curve - enterprise expenses for the month.From the point of spending the last day of the month draw a horizontal bar-line to the income curve.Where they intersect, there is the break-even point.See what it is still on the schedule, it will be its numerical expression in Russian rubles.

breakeven point (formula)

second way to find the break-even point, too, is not complicated, it is necessary only to substitute your details into the formula.Here is the formula: A = B / (C - D), where A - break-even point expressed in total sales;B- the total amount of fixed costs;C- price per unit of output;D- variable costs attributable to one unit of output.

For example, examine the data for the production of buns bakery, we got that fixed costs per month (B) equal to 50 thousand rubles, a bread roll costs 10 rubles (C), variable costs per month, which lie on one roll, equal 3rubles.Now consider the formula.

break-even point is 50,000 / (10-3), we get round, 7143 units of production.So, in order not to incur losses, it is necessary to issue it as muffins.If there will be more, the profits generated.If you raise the price of a roll, the costs will remain the same, the break-even point will decrease.