Question

Suppose that you want to start a new business. You know that the revenue is a function of the number of widgets that your new company sells and that the cost is a function of the number of widgets that your new company produces. Given this information, what method would you use to solve for the break-even point? Explain what your answer means.

Answer 1

How to calculate breakeven point is a key financial analysis tool used by business owners. Once you know the fixed and variable costs for the product your business produces, or a good approximation of them, you can use that information to calculate your company's breakeven point. Itis a popular tool used by small business owners to determine how much volume of their product they must sell in order to make a profit. It is also an important part of cost-volume-profit analysis.