Hi!

The main difference between Payback (PB) and breakeven (BE) is that PB is related to the years needed to pay back an initial investment, while BE is the specific period in which the Marginal Profit equals the Fixed Costs.

More in detail, Marginal Profit = Revenues - Variable Costs, so the formula can be written also as Fixed Costs = Revenues - Variable Costs.

Generally speaking, you need to think about the time required to cover your Fixed Costs.

To avoid confusion, if the problem is related to an investment it will always involve a Payback period. Otherwise, you will need to focus on the Breakeven point.

P.S. Remember that you can be asked to calculate Breakeven point both in terms of time (period) both in terms of quantity / volumes required to cover your fixed costs.

Hi!

The main difference between Payback (PB) and breakeven (BE) is that PB is related to the years needed to pay back an initial investment, while BE is the specific period in which the Marginal Profit equals the Fixed Costs.

More in detail, Marginal Profit = Revenues - Variable Costs, so the formula can be written also as Fixed Costs = Revenues - Variable Costs.

Generally speaking, you need to think about the time required to cover your Fixed Costs.

To avoid confusion, if the problem is related to an investment it will always involve a Payback period. Otherwise, you will need to focus on the Breakeven point.

P.S. Remember that you can be asked to calculate Breakeven point both in terms of time (period) both in terms of quantity / volumes required to cover your fixed costs.