Break even calculation

Question

to get to the break-even point in units I have used the formula Revenue = cost. QTY x selling price = (variable cost x qty) +FC. With this formula, I'll get 34 units that they must produce in order to become profitable. But solution indicates 9 units. can someone please explain that to me.

Thanks

Answer 1

Hi Maximilian,

If it helps, your formula is correct.

Where the mistake appears is unclear to me. There might also just be an issue with the case.

What would matter in a real life scenario is that you align the formula with the interviewer (i.e., the approach for solving the problem) and then go ahead with the computations step by step so they follow what you are doing.

Also, if you are looking into other common formulas and terms for interviews, the following resource might be useful:

Expert Guide: The Must-Know Consulting Terms for Interviews

Good luck!
Cristian

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Answer 2

Hey Maximilian,

Just to add to Cristian's answer, make sure you're learning how to apply breakeven. As breakeven can apply to many different formulas (solving for years, age, price, quantity, etc.)

Answer 3

Hi, Your reasoning is completely right, without changing the cooking speed the business is not profitable. If you r... (read entire answer)

Hi, Your reasoning is completely right, without changing the cooking speed the business is not profitable. If you read carefully that part, the author says: Assuming that... (read entire answer)

Answer 4

On a high level perspective you're right. COGS are increasing and deteriorating the profit margin. But if you dig a l... (read entire answer)

On a high level perspective you're right. COGS are increasing and deteriorating the profit margin. But if you dig a level deeper, the issue is not in a simple increase in COGS (... (read entire answer)