BREAK-EVEN ANALYSIS

The break-even point as the level of sales at which the company’s profit is zero. What we call break-even analysis is really just a special case of target profit analysis in which the target profit is zero. We can use either the equation method or the formula method to solve for the break-even point, but for brevity we will
illustrate just the formula method. The equation method works exactly like it did in target profit analysis. The only difference is that the target profit is zero in break-even analysis.Break-Even in Unit Sales In a single product situation, recall that the formula for the unit sales to attain a specific target profit is:


Unit sales target profit = Target profit + Fixed expenses
                                                   Unit CM
                                           

To compute the unit sales to break even, all we have to do is to set the target profit to zero in the above equation as follows:
Unit sales to break even =  0 + Fixed expenses
                                                 Unit CM
                             

Unit sales to break even =  Fixed expenses
                                                Unit CM
                           
The break-even point can be computed as follows:

Unit sales to break even =  Fixed expenses
                                               Unit CM
                                         = 35,000
                                              100
                                         =  350