3. Break Even Point Analysis

Question 1

What is the break-even point (BEP)?

Answer 1

The break-even point is the point in which revenues are equal to expenses

There is no gain nor loss.

Question 2

What are some options to reduce the break-even point?

Answer 2

• Reduce fixed costs (renegotiate rent, reduce electricity bills etc)
• Reduce variable costs (find a cheaper supplier of raw materials)
• Increasing the price of the goods sold

Question 3

What is the unit contribution margin?

Answer 3

It is the marginal profit per unit sold

Or

The portion of each sale that contributes to fixed costs

Question 4

What is target income sales?

Answer 4

It represents the sales value necessary to reach a target income

(The break even point is a case of targeted income sales where targeted income is 0)