06 Apr Break-even point
Do you currently know the break – even point for your company ?
Why is it important to me ?
It helps you determine the number of sales that need to be made in order to cover your expenses. The higher the expenses for the business, the higher the break-even point will be, meaning the more goods or services you will need to sell.
What is the break-even point ?
The break-even point (BE) is the amount of sales needed so you don’t make a loss. In other words, the break-even point is where your company total sales is equal to total expenses.
- Selling price per unit R 100
- Cost of sale per unit R 75
- Therefore, Gross Profit R 25 or 25%
- If your total fixed costs are R 200
- Your break even point is calculated as Total Fixed Costs/ Gross Profit % = R 200 / 0.25 = R 800
- This means the company needs to make sales of R 800 to cover expenses and not make a loss.
I have attached a break even calculator for you for ease of calculation.
Thank me later 🙂
Pamella Jabu Ndzumo
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