How to Calculate Breakeven Point?

2 May

How to Calculate Breakeven Point?

 

People run business mainly to make profits and till the money which has been invested in the capital is got back whatever money that is earned till that point of time cannot be called as a profit. To calculate the point at which the investment is got back is known as the break-even point and any product sold from this point contributes towards to profit and not selling contributes to loss.

There are many online tools available to calculate break even point but before that the parameters involved should be known and then people can easily understand how to calculate break even point. Fixed costs and variable costs are the two main parameters involved in investment, where fixed cost is the initial investment towards business setup and variable cost is the working capital or operational expenses involved towards making each product and this happens only when a product is made.

For break even, when the money towards fixed cost is obtained through business earnings the break even point is attained, as for income obtained for each product manufactured and sold therefore shall contribute to profit alone.