How to Determine a Breakeven Point.
In business, a company's break-even point occurs when its total revenue equals its total
costs.
You will need A fixed cost A selling point and a variable unit cost.
Step 1.
Identify the fixed cost to produce the first unit of a product.
For example, if the start-up cost is $20 to rent space for the first month of business,
the fixed cost is $20.
Step 2.
Identify the selling point.
If the manufacturer plans to sell each product for $1, the selling point is $1.
Sales can be usually be increased by lowering the selling point, but that raises the break-even
point.
Step 3.
Identify the variable unit cost.
If it costs the manufacturer $0.57 to make each product, the variable unit cost is $0.57.
Step 4.
Calculate the break-even point using the formula: Break-Even Point equals Fixed Cost divided
by the Unit Price minus the Variable Unit Cost.
Did you know Marketing managers use break-even points to evaluate profit potential and risks
associated with marketing strategies.