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Break-Even Point Concept
The Break-Even point represents the amount
of goods and services that a company has to sell so that the total
amount of the obtained profits with the sales is equal to the total of
costs (including fixed costs and variable costs) in which the company
incurs to produce and commercialize that quantity. The Break-Even Point
can also be defined in terms of value, corresponding, in this case, the
amount of sales needed to cover the total costs. Having this concept in
mind, in the break-even point the profits are null, becoming positive
for superior quantities and negative for inferior quantities.
The calculation of the Break-Even Point
analyses allows making simulations as for the company’s results, being
used a lot in the realization of viability analyses, for it allows
acknowledging the minimum necessary extent to turn the project
profitable.
Calculation formula: To calculate the
Break-Even Point in terms of values, can be used the following form (in
which is notorious the dependency relatively to the fixed costs and the
margin applied over the variable costs):
Translated from Portuguese
by Susana Saraiva, Portuguese-English and English-Portuguese translation
specialist. Contact: spams@sapo.pt.
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