Formula for Break-Even Points
Use the following formula to find the break-even point:
Sales = Fixed expenses + Variable expenses + Profit where the profit is zero
For example, a company sold $3,500 of products (100 units priced at $35 each).The company has fixed expenses of $3,000 and variable expenses of $5 per unit ($5 x 100 units= $500).
$3,500 = $3,000 + $500 + 0
This shows the sales level where the break-even point occurs. The company does not make a profit or a loss at this level. If the sales number is larger, it moves into the profit area. If the sales number is smaller, it moves into the loss area.
