ECONOMICS

Detailed explanation-1: -The break-even point is calculated by dividing the total fixed costs of production by the price per individual unit less the variable costs of production. Fixed costs are costs that remain the same regardless of how many units are sold.

Detailed explanation-2: -As illustrated in the graph above, the point at which total fixed and variable costs are equal to total revenues is known as the break-even point. At the break-even point, a business does not make a profit or loss. Therefore, the break-even point is often referred to as the “no-profit” or “no-loss point.”

Detailed explanation-3: -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.