Break-Even Point

To determine the value of sales and quantities, at a point where there is neither profit nor loss, entrepreneurs use the technique of break-even point (BEP) or leveling point. To do this, is necessary the following elements:
a) Total fixed cost;
b) Variable cost unit;
c) Unit sale price.
The costs are classifieds in:
a) Fixed costs - those that do not depend on sales volume. E.g. rent, depreciation, interest, office expenses etc. It is known however that these costs are not fixed forever and when placed in the graph mode they vary by steps, in the time.
b) Variable costs - those who depend on sales volume; e.g. raw materials, direct labor, etc.
c) Semi-fixed or semi-variable costs - those composed of a combination of a fixed part that is independent of production volume and other part variable that changes according to the scale of production.
d) Direct costs - those that are directly associated with the cost of the product; e.g. raw materials and labor used in production.
e) Indirect costs - those costs are directly associated with the product. They are attributable by criteria allocation; e.g. factory rents, factory supervision etc.
How to calculate the break-even point.

Related Topics

DuPont Analysis Investments - Net Present Value Discounted Cash Flow (DCF) Internal Rate of Return (IRR) Modified Internal Rate of Return (MIRR) Average Interest Rate Average Rate of Return Break-Even Point in Quantities Break-Even Point (BEP) in Sales French Amortization System Constant Amortization System German Amortization System Sinking Fund American Amortization System Amortization - Average Constant and French Straight Line Depreciation Method Sum of Digits Depreciation Method (SYD) Balance Sheet Analysis Cash Flow Statement by Direct Method Cash Flow Statement by Indirect Method