How to Calculate Break Even Point?

How do you find breakeven point?

Breakeven Point Calculation

Breakeven point is the term widely used in Finance to analyse the point at which the total expense of a company equals the total revenue. Use our simple step by step tutorial and learn how to calculate break even point.

Break even point Formula
Break even point = Fixed cost / Gross Profit Margin
Gross Profit Margin = Sales price - Variable cost

Step 1:
Assume, XYZ company is selling tv at a fixed cost of Rs. 65,000 per month. Sales price and variable cost of the company is Rs.2000 and Rs.500 respectively. Find the break even point?
Fixed cost - Rs. 65,000
Sales Price - Rs. 2000
Variable Price - Rs. 500

Step 2: We have to find the Gross profit margin cost.
Gross Profit Margin = Sales price - Variable cost
=2000 - 500 = Rs. 1500
Gross Profit Margin = Rs. 1500

Step 3: To find the Break even point of the company, substitute the obtained values in the formula.
Break even point = Fixed cost / Gross Profit Margin
=65,000 / 1500
Break even point = 43

Thus, the company has to sell 43 TVs to cover their total expenses, fixed and variable cost.

Related Topics