Supply Chain Concepts
Break Even Point
Major Topic Area: accounting
Break even points are very critical for making marketing decisions. It represents the amount of demand ,in units, required to pay all of the fixed costs associated with a product or service.
After the break even point is realized, all incremental sales will generate profits for the seller.
EXAMPLE:
A company has decided to conduct a 1-day training seminar. Each registrant will be charged $600 to attend.
Assume a workshop with the following costs:
| Detail | cost | fixed or variable |
| hotel room rental | $200.00 | fixed |
| advertising | $4800.00 | fixed |
| refreshments | $25.00 | variable |
| books | $75.00 | variable |
Each registrant generates $500 of marginal profit ( i.e. $600- 25 - 75). I order to cover the fixed costs 10 registrants are required. The break even point is 10.
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