For this reason, break-even point is an important part of any business plan presented to a potential investor.įor existing businesses, this can be a useful tool not only in analyzing costs and evaluating profits they’ll earn at different sales volumes, but also to prove their potential turnaround after disaster scenarios. 10,00,000 First we need to calculate the. For an example: Variable costs per unit: Rs. This is because some companies may take years before turning a profit, often losing money in the first few months or years before breaking even. The basic formula for break-even analysis is derived by dividing the total fixed costs of production by the contribution per unit (price per unit less the variable costs). Potential investors in a business not only want to know the return to expect on their investments, but also the point when they will realize this return. In other words, you've reached the level of production at which the costs of production equals the revenues for a product.įor any new business, this is an important calculation in your business plan. The break-even point is the point at which total cost and total revenue are equal, meaning there is no loss or gain for your small business.
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |