Breakeven Analysis

For a firm, the breakeven point is the quantity of the sales required by the firm to cover its total cost, i.e., Total revenue = Total cost. At this quantity of sales the firm's net income is zero.

We know that:


F includes both fixed operating cost and fixed financing cost.

Breakeven quantity is the quantity where EBIT = 0. So, we solve for Q where EBIT = 0.

Q=(Total Fixed Cost)(PVC)Q=\frac{(\text{Total Fixed Cost})}{(P-VC)}


Let's say we have the following data about a company:

Price per unit = $8

Variable costs = $6

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