By Mark Oldberg: December 6, 2017: Video

 

 

 

The break-even point is just a mathematical formula you can use to figure out how many units of a product you need to sell before you are no longer losing money. To calculate this you will need to know three things, your fixed costs, your variable costs, and the price you are selling your product for.

Fixed costs are costs that are independent from the number of units you sell. Things like rent. It is the same amount every month no matter what.

Variable costs are costs that are directly tied to how many units you sell. These are usually things that consist of making the actual product. Say it costs you $4 to make a toy car. Your variable cost when trying to determine the break-even point for that toy car would be at least $4.

Selling price, well that is just the selling price.

So the formula is this: Fixed Costs ÷ (Price - Variable Costs) = Break-even Point in Units.

So there you have it. Collect your numbers, do your math, and figure out what your break-even point is.  

 

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