Breakevenanalys

Breakevenanalys, or break-even analysis, is a financial method used to determine the level of sales at which total revenues equal total costs, resulting in zero profit. It helps organizations assess profitability, pricing, production levels, and budgeting decisions by illustrating the relationship between costs, volume, and profit.

The classic approach uses fixed costs, variable costs per unit, and price per unit. The break-even point in units is fixed costs divided by the contribution margin per unit (price minus variable cost). The break-even point in sales value is fixed costs divided by the contribution margin ratio (contribution per unit divided by price). In multi-product settings, a weighted average contribution margin can be used, and the method can be extended with sensitivity analysis and scenario planning.

A common related measure is the margin of safety, which expresses how much actual sales can drop before reaching break-even. This helps gauge risk and planning flexibility. The analysis is widely used for pricing decisions, product line evaluation, and capital budgeting, as well as for setting targets and monitoring performance.

Limitations include the assumption of linear costs and prices, constant cost structures, and the neglect of time value, capacity constraints, and non-financial factors. Results are most reliable for short to medium horizons and when costs and prices are relatively stable.

Example: fixed costs = 50,000; price per unit = 100; variable cost per unit = 60; contribution margin per unit = 40. Break-even point = 50,000 / 40 = 1,250 units, or 1,250 × 100 = 125,000 in sales. Margin of safety depends on actual sales relative to this level.