What is the break-even point? | AccountingCoach
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Get our free widgets. Add the power of Cambridge Dictionary to your website using our free search box widgets. This can be converted into units by calculating the contribution margin unit sale price less variable costs.
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Dividing the fixed costs by the contribution margin will provide how many units are needed to breakeven. That is now their breakeven point on the trade. If the stock is trading below this, the benefit of the option has not exceeded its cost. If the stock is trading above that price, the benefit of the option has not exceeded its cost.
The information required to calculate a business's BEP can be found on their financial statements. If they generate more sales, the company will have a profit. If they generate fewer sales, they will have a loss.
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It is also possible to calculate how many units need to be sold to cover the fixed the costs, which will result in the company breaking even. To do this, calculate the contribution margin, which is the sale price of the product less variable costs. If the company sells more units than this they will have profit. If they sell less, they will have a loss. Advanced Options Trading Concepts. Financial Statements.
Your Money. Personal Finance. Your Practice. Popular Courses. Login Newsletters. Key Takeaways In accounting, the breakeven point is calculated by dividing the fixed costs of production by the price per unit minus the variable costs of production. The breakeven point is the level of production at which the costs of production equal the revenues for a product.
In investing, the breakeven point is said to be achieved when the market price of an asset is the same as its original cost.