1. Digital representation of breakeven point:
This is the most intuitive way to express the specific value of breakeven point. Usually, the break-even point is expressed in monetary units, that is, the total revenue is equal to the total cost. This amount can be used to measure the minimum sales or income level required for an enterprise or project to break even.
2. Graphical representation of breakeven point:
Graphically, the breakeven point is usually represented as an intersection point, which intersects with the total revenue curve and the total cost curve. At this intersection, the values of the two curves are equal, that is, the total income is equal to the total cost. This graphic representation can help managers understand the breakeven point more intuitively.
3. The formula of breakeven point is as follows:
The breakeven point can also be expressed by mathematical formula. The following formulas are commonly used to calculate the breakeven point:
Break-even point (BEP) = fixed cost/(selling price-variable cost)
Among them,
Fixed costs are costs that do not change with output, such as rent and wages.
The selling price is the selling price of each unit product.
Variable cost is the cost directly related to output, such as raw material cost and labor cost.
This formula shows that the breakeven point depends on the relationship among fixed cost, selling price and variable cost. When the sales price is higher than the variable cost, the break-even point is low; When the sales price is lower than the variable cost, the break-even point is higher.
4. The breakeven point chart shows that:
The breakeven point can also be represented by drawing a breakeven diagram. Break-even chart is a chart used to visualize the break-even point, which usually includes total cost curve, total income curve and break-even point mark.
The expression of breakeven point depends on the specific situation and demand. Either way, understanding the breakeven point is very important for the management of enterprises and projects. It can help managers to determine the minimum sales that must be achieved to avoid losses, and formulate appropriate pricing strategies, sales strategies and cost control strategies. In addition, the breakeven point can also be used to evaluate the risk and sustainability of enterprises and provide important reference for enterprise decision-making.