Break Even Point
To get to the break even point, you need to know the total costs and the total revenue. There is either the graph method that takes time to create but allows you to vary your numbers, or the simple formula you can use to calculate how many products you need to sell to make a profit: fixed costs/(selling price-variable costs).
The fixed costs are the costs that have never and wont ever change, this can vary from being weekly, monthly and yearly. These can be rent, mortgage, permanent wages.
The variable costs are the costs that are able to be changed, this can be changed on purpose by choice, or they may have to be changed by the figures from each of the numbers given from each of the other charts and graphs made from the rest of the business.
Total costs are the costs you spend, this can be buying parts, products, paying wages, pay for space, budgets for sections within the company. the total cost is everything you have to pay out of the business.
Sales revenue is the money that comes into the business from the sale of items. For instance: a clock is £15 and you sell 100, your sales revenue for that product would be £150.
What affects the BEP?
Your break even point can change if your total costs change or when your variable costs change. This can include your sales revenue.
Why is BE useful?
The break even point is useful because it shows the company how much money they need to make to not have lost and money and to not have made a profit. This also shows them how many products they need to sell to get to this point.