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Having issues with breakeven equation

Someone asked on Sep 17, 2018 - 3 answers

Can someone please tell me the different ways to get break even? I researched on the internet and found BE in sales and units but they look like the exact same thing without any differentiation.

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Kay replied on Sep 17, 2018

Hi Anonymous,

I think this would be easier to answer if you provided the example you were stuck on?

Generally breakeven is just the time when:

revenue = cost

To break this down to what works in most cases:

price*annual volume sold*number of years = initial investment + fixed costs*number of years + variable cost*annual volume sold*number of years

Let me know if this doesn't apply to your example! :)

Kay

Benjamin replied on Sep 17, 2018
ex-Manager - Natural and challenging teacher - Taylor case solving, no framework

Hi,

Break even is when the volumes you sell allow you to cover your fixed cost.
Litteraly the fixed cost are payed by the margin you generate on each product sold.
Therefore

Break Even Volume = Fixed costs / (Price - variable costs)

Hope this helps
Best
Benjamin

Vlad replied on Sep 17, 2018
McKinsey / Accenture / Got all BIG3 offers / More than 300 real MBB cases / Harvard Business School

Hi,

Its:

(Price - VC)*Q - FC = 0

Best!

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