ECONOMICS

Detailed explanation-1: -To calculate the break-even point in units use the formula: Break-Even point (units) = Fixed Costs ÷ (Sales price per unit – Variable costs per unit) or in sales dollars using the formula: Break-Even point (sales dollars) = Fixed Costs ÷ Contribution Margin.

Detailed explanation-2: -This pricing methodology helps the company in setting up the lowest acceptable price. Break-even price is calculated by using this formula = (Total fixed cost/Production unit volume) + Variable Cost per unit.

Detailed explanation-3: -Take your total cost of production and subtract your variable costs multiplied by the number of units you produced. This will give you your total fixed cost. You can use this fixed cost formula to help.

Detailed explanation-4: -Profit earned following your break even: Once your sales equal your fixed and variable costs, you have reached the break-even point, and the company will report a net profit or loss of $0. Any sales beyond that point contribute to your net profit.