Break Even

Your company produces 962 units of output per year (units of output could be anything). Each unit has a production cost of $3,599.00. Your company is able to produce these units because it has in place an infrastructure which costs $15,423.00 per month to maintain. How much would the company have to sell each unit for in order for the company to break even if you are guaranteed to sell the entire production?

First you will need to find the Fixed monthly expenses and the Variable expenses:

$15,423.00 x 12 months = $185,076.00

Variable expenses $3,599.00 x 962 = $3,462,238.00

Total Expenses $3,647,314; if divided by the total units will give you a minimum selling price of $3,791.38 per unit in order to break even. Any pricing higher than that will generate a profit. This price at which the revenue equals the expenses is known as the Break-even point, and it is the point at which the business is meeting its obligations but is not generating any profits.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.