Break-Even Point Concept
The Break-Even point represents the amount of goods and services that a company has to sell so that the total amount of the obtained profits with the sales is equal to the total of costs (including fixed costs and variable costs) in which the company incurs to produce and commercialize that quantity. The Break-Even Point can also be defined in terms of value, corresponding, in this case, the amount of sales needed to cover the total costs. Having this concept in mind, in the break-even point the profits are null, becoming positive for superior quantities and negative for inferior quantities.
The calculation of the Break-Even Point analyses allows making simulations as for the company’s results, being used a lot in the realization of viability analyses, for it allows acknowledging the minimum necessary extent to turn the project profitable.
Calculation formula: To calculate the Break-Even Point in terms of values, can be used the following form (in which is notorious the dependency relatively to the fixed costs and the margin applied over the variable costs):
BEP = FC / (M/V)
