Your Ask Joey ™ Answer

How to interpret the breakeven point in units?

The formula for calculating breakeven point in units is to take total fixed costs and divide by contribution margin per unit. Contribution margin per unit is calculated as revenue per unit minus variable costs per unit.

The output of this formula will tell the company exactly how many units they need to sell to cover their fixed costs. If they end up selling more units, they will generate a profit, and if they sell less units, they will incur a loss. For example, if the breakeven point in units is 100 units, and the company will sell more than 100 units, they will generate a profit. If they sell less than 100 units, the company would generate a loss.

Back To All Questions

You might also be interested in...

  • Three Reasons to Become an Accountant

    If you’re someone who is intrigued by numbers, enjoys problem-solving and wants to help others, then accounting might be the perfect career for you. While some people may be put off by its unalluring reputation, accounting is an excellent career choice that has many benefits. In this article, we look at three of the reasons...

  • Qualified Retirement Planning: Tax Advantages & Disadvantages

    Home Advantages and Disadvantages of Tax-Free and Deferred-Tax Retirement Plans What are “qualified retirement plans” and how can they be effective for tax planning? Well, there are plenty of tax savings advantages to individuals contributing to tax-free retirement accounts, as well as tax-deferred retirement accounts. However, this doesn’t necessarily mean that there are no disadvantages...

  • CPA Evolution Survival Guide

    Download Your eBook by selecting the download icon in the top right-hand corner