Hi, I am SK, please somebody explain how to calculate break even point and where it appears in Balance Sheet.. Thanks...

The basic equation for break even is fixed costs divided by unit contribution margin. Contribution margin (CM) is sales price less variable costs.

However, there can be a lot of other ways to figure it out depending on the type of information you have available and what you are attempting to do.

And break even doesn't go on a balance sheet. It's just a number used for cost analysis "in-house" so to speak, and it's not an actual number, but rather a theoretical one.

It's like saying, "Well, if I make $30,000 this year, I could spend $30,000 and break even." That doesn't mean you made that amount, nor that you spent that amount. It's just theoretical. Therefore, it doesn't belong on financial statements. If it's reported anywhere, it would be internal reports for the accountant and management to use.

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Originally Posted by morgaine300

The basic equation for break even is fixed costs divided by unit contribution margin. Contribution margin (CM) is sales price less variable costs.

However, there can be a lot of other ways to figure it out depending on the type of information you have available and what you are attempting to do.

And break even doesn't go on a balance sheet. It's just a number used for cost analysis "in-house" so to speak, and it's not an actual number, but rather a theoretical one.

It's like saying, "Well, if I make $30,000 this year, I could spend $30,000 and break even." That doesn't mean you made that amount, nor that you spent that amount. It's just theoretical. Therefore, it doesn't belong on financial statements. If it's reported anywhere, it would be internal reports for the accountant and management to use.

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Thanks Morgaine for your answer...