Breakeven Point Essay, Research Paper

Breakeven is the

point at which a business is neither making money nor losing money, and

managing to cover their costs exactly. This is a businesses main objective from

the start. Below the point of breakeven is a loss and above it is a profit.To help them to get started, businesses often have to take

out loans. Paying off these loans is essential. The company?s breakeven point can be found by using a

graph, to find the total costs, fixed costs, and revenue. The point at which

the total costs and total revenue lines cross is the businesses breakeven

point, and after this they will go into the profit area. The stock, which the company sells after they have broken

even, is known as the ?margin of safety.? A graph is a good way of displaying this, as it can be

seen straightaway how likely the firm is to actually manage to cover their

costs. However charts can never be totally accurate, as new stock/machinery

could be bought, and costs such as shop rent could increase.The breakeven point is calculated by: Fixed Costs ——————————– Sales Prices ? Variable Costs