![]() ![]() Here is a calculator for you to calculate your company’s break-even point. In other words, the business would not need to sell so many shampoos to make sure it could pay its fixed costs. Increasing the selling price of shampoos.Īny of these would reduce the break-even point.Trying to reduce variable costs (find new shampoo supplier).Trying to reduce the fixed costs (move to smaller office space tighten control of telephone bills, office supplies, etc.). ![]() If you think that you cannot sell that many, you need to look at: Then you need to determine if you can make and sell 20,000 bottles of shampoo per month. If you sell 20,000 units your income equals your fixed costs.Īfter calculating your breakeven point you can realize that if your business sells fewer than 20,000 bottles of shampoo each month, it will make a loss if it sells more, it will make a profit. The company pays all costs that need to be paid but the profit is zero.įor example, let’s say that you are a shampoo wholesaler and your variable cost per unit is $2.5, your average sales price is $5, and your fixed costs are $50,000. To calculate a break-even point based on units: Divide fixed costs by the revenue per unit minus the variable cost. One is based on the number of units of product sold and the other is based on points in sales in Canadian dollars. The break-even point (BEP) is the point at which expenses (fixed and variable) equal revenue. There are a few basic formulas for determining a business’s break-even point. Administrative and sales costs are usually considered fixed costs for this analysis. Performing a Break-Even Analysis: Fixed Costsįixed costs include (expenses such as) rent and office payroll, which do not change much from month-to-month, no matter how much product you sell. Basically, a break-even analysis lets you know how many units (pieces, hours, cartons) of product you must sell to cover your business costs. It can also be helpful when you are trying to figure out if an idea is a good one or not. Business Break-Even Point Definition and Calculator Knowing your company’s break-even pointīreak-even analysis is key to good business planning. ![]()
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