ECONOMICS

Detailed explanation-1: -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. In other words, you’ve reached the level of production at which the costs of production equals the revenues for a product.

Detailed explanation-2: -The contribution margin is the excess between the selling price of the product and the total variable costs. For example, if an item sells for $100, the total fixed costs are $25 per unit, and the total variable costs are $60 per unit, the contribution margin of the product is $40 ($100-$60).

Detailed explanation-3: -A company’s breakeven point is the point at which its sales exactly cover its expenses. Fixed Costs ÷ (Price-Variable Costs) = Breakeven Point in Units. Pricing a product, the costs incurred in a business, and sales volume are interrelated.

Detailed explanation-4: -When determining a break-even point based on sales dollars: Divide the fixed costs by the contribution margin. The contribution margin is determined by subtracting the variable costs from the price of a product.