10 Examples of Balance Point

The breakeven is a state of a company that is achieved when income is equal to expenses, because the number of units sold of a product is sufficient to cover costs. For example: A business needs to sell 250 units of a product for revenue to equal expenses.

In economics, the break-even point (also called break-even point or break-even point) establishes the minimum number of units that must be sold in order not to make a loss. But this point also implies that there are no profits and, therefore, to obtain profits it is necessary to exceed that minimum sales.

Companies use the breakeven point to know when a production is profitable and, from that, it is possible to project strategies, set goals and objectives, and determine if starting a new business is worthwhile.

Break-Even Formula

To find out what the break-even point is, that is, the minimum number of products that must be sold to avoid losses, the following formula is used:

Number of units = fixed costs / (selling price of each unit – variable cost of each unit)

The components of this formula are:

For example: If in a factory the fixed costs add up to $5,000, the selling price of each unit is $50 and the variable cost of each unit is $30; 250 units must be sold to break even, since:

Number of units = 5,000 / (50 – 30)

Number of units = 5,000 / 20

Number of units = 250

Therefore, if the company sells less than 250 units, it will make a loss, and if it sells more than 250, it will make a profit.

However, it is necessary to take into account that this formula is only applicable when certain conditions are met:

Other Uses of the Break-Even Formula

In order to find the balance point, this formula is used as an equation to determine:

Break-Even Examples

1. The person in charge of the finances of a company that sells screwdrivers has to find the point of balance. To do this, take into account that:

• • Fixed costs add up to $70,000.
  • Each screwdriver sells for $300.
  • The variable cost of each unit is $160.

The break-even formula is applied:

Number of units = 70,000 / (300 – 160)

Number of units = 70,000 / 140

Number of units = 500

Therefore, it is necessary to sell 500 units to reach the equilibrium point.

1. In a restaurant, managers want to find the balance point of a dish. For this, it is taken into account that:

• • Fixed costs add up to $300,000.
  • The dish costs $1,000.
  • The variable cost of each plate is $800.

The break-even formula is applied:

Number of units = 300,000 / (1,000 – 800)

Number of units = 300,000 / 200

Number of units = 1,500

Therefore, they will have to be sold 1,500 plates to achieve the balance point.

1. A company that manufactures refrigerators has to find the equilibrium point. For this, it is taken into account that:

• • Fixed costs add up to $400,000.
  • The price of each refrigerator is $2,000.
  • The variable cost of each refrigerator is $1,000.

The break-even formula is applied:

Number of units = 400,000 / (2,000 – 1,000)

Number of units = 400,000 / 1,000

Number of units = 400

Therefore, they will have to be sold 400 fridges to get the balance point.

1. A company that manufactures desks wants to know the break-even point for these products.. For this, it is taken into account that:

• • Fixed costs add up to $280,000.
  • The price of each desk is $1,200.
  • The variable cost of each desk is $500.

The break-even formula is applied:

Number of units = 280,000 / (1,200 – 500)

Number of units = 280,000 / 700

Number of units = 400

Therefore, they should be sold 400 units to achieve the balance point.

1. A designer wants to know how many dresses she must sell to break even.. To do this, take into account that:

• • Fixed costs add up to $7,500.
  • Each dress sells for $500.
  • The variable cost of each dress is $350.

The break-even formula is applied:

Number of units = 7,500 / (500 – 350)

Number of units = 7,500 / 150

Number of units = 50

Therefore, the designer will have to sell 50 dresses to find the balance point.

1. A company that sells computers wants to know what the break-even point is for these products.. For this, it is taken into account that:

• • Fixed costs add up to $540,000.
  • Each computer sells for $5,000.
  • The variable cost of each computer is $2,000.

The break-even formula is applied:

Number of units = 540,000 / (5,000 – 2,000)

Number of units = 540,000 / 3,000

Number of units = 180

Therefore, they should be sold 180 computers to reach the equilibrium point.

1. The owners of a store where donuts are sold want to know what the break-even point is for these products.. To do this, they take into account that:

• • Fixed costs add up to $81,000.
  • Each donut sells for $120.
  • The variable cost of each donut is $30.

The break-even formula is applied:

Number of units = 81,000 / (120 – 30)

Number of units = 81,000 / 90

Number of units = 900

Therefore, it is necessary to sell 900 donuts to reach the equilibrium point.

1. The managers of a company that manufactures rice want to know the break-even point of the business.. To do this, they must take into account that:

• • Fixed costs add up to $120,000.
  • Each package of rice sells for $60.
  • The variable cost of each package of rice is $30.

The break-even formula is applied:

Number of units = 120,000 / (60 – 30)

Number of units = 120,000 / 30

Number of units = 4,000

Therefore, the company must sell 4,000 packages of rice to reach the equilibrium point.

1. The owners of a company that sells watches want to know what the break-even point is.. To do this, they take into account that:

• • Fixed costs add up to $56,000.
  • Each watch sells for $1,500.
  • The variable cost of each watch is $800.

The break-even formula is applied:

Number of units = 56,000 / (1,500 – 800)

Number of units = 56,000 / 700

Number of units = 80

Therefore, the company must sell 80 clocks to reach the equilibrium point.

1. A shoe manufacturer wants to know the break-even point of his business.. To do this, you must take into account that:

• • Fixed costs add up to $9,000.
  • Each shoe sells for $600.
  • The variable cost of each shoe is $300.

The break-even formula is applied:

Number of units = 9,000 / (600 – 300)

Number of units = 9,000 / 300

Number of units = 30

Therefore, the manufacturer will have to sell 30 shoes to reach the equilibrium point.

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