Hello everyone,
I struggle with cases where I have to calculate the break-even point and I was wondering what approach do you suggest both for quantity and for sales so that I can understand it once and for all :-)
Thank you!
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Hi there,
To find the quantity to breakeven, you can just rearrange the breakeven formula, which is the following:
R-VC-FC=0
⇔ p*q-c*q-FC=0
Where
- R= Revenues
- VC= Variable Costs
- FC = Fixed Costs
- p = Price
- q = Quantity
- c = Variable Cost per Unit
To calculate the quantity, you can rearrange as follows:
p*q-c*q-FC=0
⇔ q=FC/(p-c)
Hope this helps,
Francesco
Hi there,
Breakeven is tough as there are so many scenarios! Just remember, all breakeven is, is solving for x, where x is some number to figure out how much of something we need.
The formula you create is specific to the case. So, we may say: We make $20 profit per shoe, and we spent $1,000 to create the shoe stand. How many shoes do we need to breakeven?
In this case, the formula is 1,000 = $20 x ====> x = 50 shoes
Understood? Feel free to message if you'd like to go through multiple examples/scenarios!
Hello!
There are multiple ways, but hte most common one is dividing all costs into the contribution margin.
For example, imagine you borrow 100 for a coffee machine, and you sell coffees for 1 USD, or which you have costs of 90 cents.
Contribution margin is 10 cents, and break even would be 100/ 0.1
Hope it helps!
Cheers,
Clara
