Definition of Break-even Point in Sales Dollars
The break-even point in sales dollars can be calculated by dividing a company's total fixed expenses by the company's contribution margin ratio .
Definition of Contribution Margin Ratio
A company's total contribution margin in dollars is the 游戏电竞线上外围APP v5.2 total net sales minus the total amount of variable expenses . Dividing the contribution margin in dollars by the total amount of net sales is the 游戏电竞线上外围APP v5.2 contribution margin ratio .
Example of Break-even Point in Sales Dollars
To illustrate the break-even point in sales dollars, let's assume that a company has fixed expenses of $100,000 per year. The variable expenses are estimated to be 80% of the net sales. This means that the contribution margin ratio is 20% of net sales.
Since only 20% of the sales dollars are available to cover the $100,000 fixed expenses, the company will need to have $500,000 of net sales ($100,000 divided by 20%). At $500,000 of net sales, the amount of variable expenses will be $400,000 (80% X $500,000). That leaves $100,000 to cover the $100,000 of fixed expenses. Hence, at $500,000 of net sales the company will be at the break-even point, which is the 游戏电竞线上外围APP v5.2 point where sales will be equal to all of the company's expenses . This is the 游戏电竞线上外围APP v5.2 point where the net income will be zero.
