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Break even analysis - Coggle Diagram
Break even analysis
break even point
There are 2 ways to calculate it
contribution method
This method involves a calculation
1.selling price unit - variable cost per unit=contribution
fixed cost / contribution
simplified version
Fixed cost / (selling price unit - variable cost per unit)
producing a break even chart
This method is useful befor the launch
It helps the business know the sales the company needs to break even
Margin of safety
The excess of profit after breaking even
formula
actual output - break even output
The higher the margin of profit the higher the profit
profit
margin of safety x contribution per sale
to calculate the level of output needed to achieve a target level of profits.
fixed cost + target profit /contribution per unit