Breakeven analysis allows businesses to determine when they will be able to cover all expenses to begin making a profit, a helpful tool in analyzing costs and profits. Explained in the article is how to find a breakeven point, which uses the following formula:
Breakeven Point =Fixed Costs (Unit Selling Price- Variable Costs)
Applicability to Business
- A breakeven point shows when a business may begin making a profit (necessary for pricing)
- Breakeven analysis provides a goal-setting measure for a business
Learning Outcomes
- Identify business’s fixed and variable costs in addition to a potential unit selling price
- Use the above formula to determine a breakeven point
https://www.sba.gov/starting-business/business-financials/breakeven-analysis
