38 Break-Even Point
Learning Objectives
- Define the break-even point
How many apples does Farmer Joe need to sell to break even?
The break even point can be defined as the exact point where sales-expenses = zero. So essentially, you are not making money, but you are not losing money either. This is the point where selling one less item would create a loss and selling one more item would create a profit situation. There are two methods we can use to figure out our break even point:
- The equation method
- The formula method
We will discuss both methods in detail, but let’s start with a new company and a new product! The widgets are starting to get boring. Whether we are talking about apples, widgets or kayaks, the process is the same.
The Minnesota Kayak Company has come to you to help them determine the break even point on a new line of racing kayaks they plan to introduce to the market. These are some pricey kayaks and they want to ensure that the use of their manufacturing facility will make sense for this new line.
Are you ready to get busy?
