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- The result is the total turnover that must be generated in order to break even.
- At the break-even point, the total cost and selling price are equal, and the firm neither gains nor losses.
- Our goal is to deliver the most understandable and comprehensive explanations of financial topics using simple writing complemented by helpful graphics and animation videos.
- You can ignore items which are not significant for the result of your company operations.
- The total fixed costs are $50k, and the contribution margin ($) is the difference between the selling price per unit and the variable cost per unit.
A firm can analyze ideal output levels to be knowledgeable on the amount of sales and revenue that would meet and surpass the break-even point. If a business doesn’t meet this level, it often becomes difficult to continue operation. And sufficiently high turnover is in most cases not generated right after the company is founded. Should turnover increase over time, the company will move closer to the profit zone. If costs and turnover are at the same level, the company has reached the break-even point threshold.
Investors who are holding a losing stock position can use an options repair strategy to break even on their investment quickly. Break-even price calculations can look different depending on the specific industry or scenario. Being a cost leader and selling at the break-even price requires a business to have the financial resources to sustain periods of zero earnings. However, after establishing market dominance, a business may begin to raise prices when weak competitors can no longer undermine its higher-pricing efforts.
For example, operating at excessively low flow rates could cause higher radial loading on the impeller causing excessive shaft deflection leading to premature seal failures. At excessively high flow rates the pump’s required suction head may not be met and the pump could cavitate. A closely related topic to the BEP is the preferred operating region, or POR. The POR is a range of rates bep meaning of flow to either side of predicted BEP within which the hydraulic efficiency and the operational reliability of the pump are not substantially degraded. Within this region, the design service life of the pump will not be affected by the internal hydraulic loads or flow-induced vibration. Operating a pump within the POR ensures higher reliability and lower energy consumption.