Breakeven Analysis is used to calculate the number of units you need to sell in order to cover all of your fixed and variable costs.
Break Even Analysis:
Fixed Costs / (Price per Unit – Cost per Unit) = Quantity to Produce
Quantity to Produce (Price per Unit – Cost per Unit) – Fixed Cost = Amount Earned
• Item A is sold for $100 per unit.
• Item A costs $20 per unit
• Company X has fixed costs of $2,000
The breakeven point is:
$2,000 / ($100 - $20) = 25 units