Appendix M3.1: Derivation of the Break-Even Point

Total cost = Fixed cost + (Variable cost/unit) × (Number of units)
Total revenue = (Price/unit)(Number of units)
At break-even point, Total cost = Total revenue
Or Fixed cost + (Number of units) = (Price/unit)(Number of units)
Solving for the number of units at the break-even point, we get

$Break-even point (units) = \frac{Fixed cost}{Price/unit - Variable cost/unit}$ $Break-even point (units) = \frac{Fixed cost}{Price/unit - Variable cost/unit}$

This equation is the same as Equation M3-1.

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Table of Contents for Appendix M3.1: Derivation of the Break-Even Point