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The break even analysis is critical for
any business owner, because you will know exactly when you begin to make a profit. The break even point is
the lowest limit when determining profit margins. Another use for break even analysis is to use the
information from the analysis to help determine the company's financial
strategy.
Break Even Analysis Example
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Break-Even Analysis
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[Company Name]
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[Proposed Product]
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[Date]
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For the Period:
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Jan 1, 2009 - Jun 30,
2010
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Selling Price (P):
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$12.00
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Break-Even Units (X):
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100 units
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Break-Even Sales (S):
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$1,188.12
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[42]
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Fixed
Costs
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Advertising
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$1,000.00
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Accounting,
Legal
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Depreciation
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Interest
Expense
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Insurance
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Manufacturing
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Payroll
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Rent
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Supplies
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Taxes (real
estate, etc.)
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Utilities
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Other
(specify)
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Total Fixed
Costs (TFC)
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$1,000.00
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Variable
Costs
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Variables
Costs based on Dollar Amount per Unit
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Cost of Goods
Sold
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$1.00
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per
unit
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Direct
Labor
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per
unit
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Overhead
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per
unit
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Other
(specify)
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per
unit
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Sum:
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$1.00
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Variables
Costs based on Percentage
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Commissions
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7.50%
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per
unit
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Other
(specify)
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per
unit
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Sum:
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7.50%
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Total
Variable Cost per Unit (V)
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$1.90
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Contribution
Margin per unit (CM) = P - V
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$10.10
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Contribution
Margin Ratio (CMR) = 1 - V / P = CM / P
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84.2%
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Break-Even
Point
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Break-Even
Units (X)
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X = TFC / (P -
V)
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100
units
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Break-Even
Sales (S)
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S = X * P =
TFC / CMR
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$1,188.12
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Targeted Net
Income
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Targeted Net
Income Before Taxes (NIBT)
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$-
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Units required
to reach targeted NIBT, X = (TFC + NIBT) / (P-V)
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100
units
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Sales required
to reach targeted NIBT, S = (TFC + NIBT) / CMR
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$1,188.12
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Rate of return
on sales before taxes = NIBT / S
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0.0%
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Tax Rate
(T)
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25%
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Net Income
After Taxes (NIAT) = (1-T)*NIBT
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$-
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Rate of return
on sales after taxes = NIAT / S
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0.0%
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Chart
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Units
(X)
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Fixed
Cost
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Total
Cost
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Total
Revenue
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Profit
(Loss)
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0
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1,000.00
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1,000.00
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-
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(1,000.00)
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10
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1,000.00
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1,019.00
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120.00
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(899.00)
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20
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1,000.00
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1,038.00
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240.00
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(798.00)
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30
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1,000.00
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1,057.00
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360.00
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(697.00)
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40
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1,000.00
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1,076.00
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480.00
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(596.00)
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50
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1,000.00
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1,095.00
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600.00
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(495.00)
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60
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1,000.00
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1,114.00
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720.00
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(394.00)
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70
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1,000.00
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1,133.00
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840.00
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(293.00)
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80
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1,000.00
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1,152.00
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960.00
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(192.00)
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90
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1,000.00
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1,171.00
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1,080.00
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(91.00)
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100
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1,000.00
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1,190.00
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1,200.00
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10.00
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110
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1,000.00
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1,209.00
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1,320.00
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111.00
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120
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1,000.00
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1,228.00
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1,440.00
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212.00
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130
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1,000.00
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1,247.00
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1,560.00
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313.00
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140
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1,000.00
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1,266.00
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1,680.00
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414.00
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150
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1,000.00
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1,285.00
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1,800.00
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515.00
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160
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1,000.00
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1,304.00
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1,920.00
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616.00
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170
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1,000.00
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1,323.00
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2,040.00
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717.00
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180
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1,000.00
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1,342.00
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2,160.00
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818.00
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190
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1,000.00
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1,361.00
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2,280.00
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919.00
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200
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1,000.00
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1,380.00
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2,400.00
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1,020.00
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