Break Even Analaysis
Fixed costs are those that remain the same no matter how much product or service is sold. In general, lower fixed costs lead to a lower break-even point. A business will want to use a break-even analysis anytime it considers adding costs—remember that a break-even analysis does not consider market demand. There are two basic ways to lower your break-even point: lower costs and raise prices. A break-even analysis is a financial calculation used to determine a company’s break-even point Or, you might just be thinking about expanding a product offering or hiring additional personnel. You may have an idea that spurs you to open a business or launch a new product on little more than a hope and a dream. For example, if a suitcase sells at $125 and its variable cost is $15, then the contribution margin is $110. In other words, it reveals the point at which you will have sold enough units to cover all of your costs. At that point, you will have neither lost money nor made a ...