How to know if you're profiting from selling?

Break-even Analysis. This is a small tool that helps entrepreneurs project how many units of their products must be sold in order to break-even. Break-even is the point where total revenue is enough to cover total costs.

Break-even analysis is a simple computation. It points out the relationship between revenues, costs and profits. in computing break-even you need to get the following data:

Price - Unit price of the product being sold
Variable cost (per unit) - costs that change in proportion to output (raw materials, energy costs etc.)
Total fixed Cost - expenses that do not change regardless of production (rent, property tax, equipment)

Your firm breaks even when total revenue is enough to equal its total costs.

Here is the formula of Break-even analysis:


Example:

Assume that Claire's Printing Services charges $0.20 per print. If fixed costs are $30,000 a year and variable costs are $0.10 per print, Clair can compute her break-even point as follows:


As a planning tool, Claire can set his goal. This tool can tell her how much volume has to increase to break-even if she's currently operating at a loss or how much volume he can afford to lose and still break even.