Understanding Breakeven Analysis
Most businesses need to make a profit to survive. To do this, they must understand their costs and set prices accordingly. One way to determine whether a product or service is priced correctly is to conduct a breakeven analysis. A breakeven analysis is a tool that can help you calculate the number of products or services you need to sell to make a profit. It considers all of your fixed costs (expenses that remain the same regardless of how many products or services you sell) and variable costs (expenses that increase or decrease depending on how many products or services you sell). To calculate your breakeven point, Peter DeCaprio explains that you need to know two things: Fixed costs are expenses that remain the same regardless of how many products or services you sell. Examples of fixed costs include rent, insurance, and salaries. Your variable costs are expenses that increase or decrease depending on how many products or services you sell. Examples of variable costs include materials, commissions, and shipping. Breakeven Point Calculation According… Read More »Understanding Breakeven Analysis