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How to calculate your 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 and Co - Chartered Accountants, located minutes from the Melbourne CBD
www.mcnamaraandcompany.com.au/contact-us
Phone +61 3 9428 1062
Email admin@mcnamaraandco.com

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