How to Calculate Break Even Volume by Peter Flom - Updated September 26, Break even volume is the number of units of a product that you have to sell in order for the sales revenue to equal total costs.
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Getty A break-even analysis is a key part of any good business plan. It can also be helpful even before you decide to write a business plan, when you're trying to figure out if an idea is worth pursuing. Long after your company is up and running, it can remain helpful as a way to figure out the best pricing structure for your products.
It sounds complicated, but it's not.
Basically, a break-even analysis lets you know how many units of stuff—say, how many ham sandwiches, iPhone apps, or hours of consulting services—you must sell in order to cover your costs.
You'll need several basic pieces of information: Fixed Costs Fixed costs are ones like rent and administrative payroll that don't change much from month to month, regardless of how many units you sell. SCORE lists many common fixed costs. Chautin suggests asking the utility company for the past year of bills for your location.
Call an insurance broker for a real quote for your particular business. Check with trade associations or web sites such as www. Variable Costs Variable costs are ones like inventory, shipping and sales commissions that rise or fall with your sales volume.
As with fixed costs, talk to trade associations, vendors and even other business owners in your field to come up with the most accurate estimate.
The ratios are not going to be that far off. Pricing This is the trickiest of your three pieces of data, since you're able to choose exactly where to set your prices. Start by looking at your competition, and how they price their products. You can also do informal focus groups to see what people might be willing to pay for your wares or services.
Do you want to be at the midpoint, higher end, or lower end?
I see people pricing earrings at three times what their competitors are charging. Why would anyone buy that? That's where a break-even analysis can come in handy. Performing a Break-Even Analysis: The Formula Once you've got your cost data and a target price, plug them in to this formula: Any sales above that are pure profit.How many calories you should aim for depends on your body size and current metabolism, but let's say you normally take in about calories per day as a break-even point.
Discuss pre-existing loans, liabilities, expected returns, projected sales and costs, break . Break-even (or break even), often abbreviated as B/E in finance, is the point of balance making neither a profit nor a loss. The term originates in finance, but the concept has been applied widely since.
The basic idea behind break-even point is to calculate the point at which revenues begin to exceed costs..
The first step is to separate a company's costs in to . The method of calculating break-even point of a single product company has been discussed in the break-even point analysis regardbouddhiste.com this article, I would explain the procedure of calculating break-even point of a multi product company.
What is the break-even point? In business accounting, the break-even point refers to the amount of revenue necessary to cover the total fixed and variable expenses incurred by a company within a.
The break even price represent the sales price that you must charge for a product in order for your revenues to meet your expenses. Finding the break even point requires you to know the fixed and variable costs for the product.