Breakeven Formula
The breakeven chart provides a picture of the relationship between sales volume and profits. However, a chart is not required for determining breakeven points. Instead, you can use a formula:
P(X) = F + V (X)
where
F = fixed costs
V = variable costs per unit
X = volume of output (in units)
P = price per unit
Rearranging this formula, the breakeven point is X = F(P – V). in other words, the breakeven point is the volume of sales where total costs just equal total revenues. If, for example, you have a product in which
F = fixed costs = $1,000.00
V = variable costs per unit = $0.75
P = price per unit = $1,00 per unit
then the breakeven point is $1,000/($1.00 – $0.75) = 4,000 units.
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