Break-even - OCRSimple calculation of break-even quantity

Drawing a break-even graph can be time-consuming, but there is a simpler way to calculate the break-even quantity:

The result of this calculation is always how many products a business needs to sell in order to break even.

Example

A business that sells T-shirts knows that:

• Its fixed costs are £400.
• The selling price (per unit) is £10.
• The variable costs (per unit) are £6.

So their BEP can be calculated as:

So this business breaks even when it sells 100 T-shirts.

Sometimes the result is a little more complex, as the BEP may not be a whole number (eg 100.12). In such cases, the business would always need to sell an additional item in order to break even. An example of this is shown below:

In this case, the business would need to sell 101 T-shirts to break even.