How to calculate the breakeven point
Video: How to Calculate Break Even Point in Sales Revenue (Learn the Easy Way) 2024, June
Break-even point is such sales revenue that covers production costs. In this case, the company does not receive profit. If the volume of production is below the breakeven point, then the company operates at a loss.
You will need
- -calculator;
- - relevant company data.
Instruction manual
1
The breakeven point can be expressed in monetary terms or in kind, i.e. volume of production (pieces of goods or products). Depending on which expression you will use, select the appropriate formula.
2
To determine the breakeven point, divide the costs into direct and variable. Direct do not depend on the volume of production and the number of operations performed with the products. Variables increase in proportion to production growth. The breakeven point of the enterprise is very important for the lender, since a value exceeding the breakeven point is an indicator of safety margin, i.e. shows how solvent the organization is.
3
If you think the break-even point in monetary terms, then use the formula: Tbd = B * Zpost (V-Zper), where Tbd is the break-even point in monetary terms, B is the sales revenue, Zpost is fixed costs, Zper is variable costs.
4
If you consider the break-even point in physical terms, then apply the formula: Tbn = Zpost / (Ts-ZSper), where Tbn is the break-even point in physical terms, Zpost is fixed costs, Ts is the unit price, Zsper is the average variable costs per unit of production.
5
After identifying the breakeven point, calculate the margin of safety of the enterprise, since it is more objective than the breakeven point, an indicator of the position of the enterprise. To identify the safety margin in monetary terms, use the formula: ZPD = (B-Tbd) / B * 100%, where Zpd - margin of safety in monetary terms, B - sales revenue, Tbd - break-even point in monetary terms. To identify the margin of financial strength in physical terms, apply the formula: Зпн = (Рн-Тбн) / Рн * 100%, where ЗПн - margin of safety in kind, Рн - sales in kind, Tbn - break-even point in kind.
