Download - Break-Even Analysis in Businesses
Break-Even Analysis
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Break-even analysis predicts when…
… Your business is going to start making profit.
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- Evaluate a start-up idea- Assess the impact of new
costs- Project profitability for a
new product
It can also be used to:
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Start with your costs…
…By separating them into fixed costs (overheads) and variable costs
You need to know your:TOTAL FIXED COSTSVARIABLE COST PER UNIT
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Dollar break-even equation:
The same as before, just express the contribution margin as a % converted into a decimal figure
62.5% = 0.625
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Hours worked break-even equation
TOTAL FIXED COSTS ÷ HOURLY CHARGE OUT RATE
HOURS TO BREAK EVEN
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Advertising spend break-even equation:
ADVERTISING SPEND ÷ CONTRIBUTION MARGIN
SALES VOLUME REQUIRED FOR AD TO BREAK EVEN
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Weighted average price…
…Is used to find a break-even point by companies selling multiple products or services
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Weighted break-even equation
TOTAL FIXED COSTS÷ (WEIGHTED AVERAGE PRICE – WEIGHTED AVERAGE VARIABLE COSTS)
SALES VOLUME REQUIRED TO BREAK EVEN
Find Out More
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