Blog & Resources

Break Even Point

The Break Even Point is a crucial measurement for business and is often over looked.

Your Break Even Point is essentially:

1.    The point of zero profit and loss, i.e., where the revenue equals the costs; or
2.    The amount of money you are required to earn (your sales) that will cover all of your out goings.


Your Break Even Point can be calculated as follows:

Fixed Expenses / ((Revenue – Cost Of Goods Sold) / Revenue)

Revenue less Cost of Goods Sold will also calculate your Contribution Margin.  The total Contribution Margin will show how much a business has to contribute to its fixed costs.

The lower you can keep your Fixed Costs / Overheads the lower your Break Even Point will be.

Typical examples of Fixed Costs include:

- Insurance

- Rent 

- Office expenses

- Light and Power

- Administrative salaries

- Depreciation and Amortisation

If you would like to discuss further please contact us:
McNamara & Company - Chartered Accountants, located minutes from the Melbourne CBD
Phone +61 3 9428 1062

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