Question

Company A sells its product for $10 per unit. If Company A has variable expenses of $5 per unit and fixed expenses of $200,000, the break-even point in units and dollars is

Answer 1

40,000 units and $400,000 are the break-even point in units and dollars respectively.

For units:

$200,000/5 = 40,000

For dollars:

40,000 x $10 = $400,000

What is a break-even point ?

The break-even threshold is reached when overall costs and total revenues are equal, leaving your small firm with no net benefit or loss. In other words, you've achieved the point in manufacturing when the income from a product matches the cost of manufacture.

This is a crucial calculation to include in your business strategy for every new venture. Potential investors want to know when they may anticipate a return on their investment as well as the rate at which it will occur. This is due to the fact that some businesses may take years before becoming profitable, frequently losing money in the initial months or years before achieving break-even. Break-even point is crucial in every company plan given to a potential investor because of this.

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