Break-even Point of A Company - Essay Example

This means that the break-even point is the level at which the business makes no profit, but is able to avoid making losses. This occurs when a business has been running for some time and wants to know the minimum level of production that it can sustain. The formula for calculating the break-even point for a single product is: However, for a company with many products, the break-even point is calculated using the formula: In this case, the weighted average contribution margin per unit refers to the average of the contribution margins for the various products in their various proportions.

The contribution margin refers to the difference between the selling price per product and the variable costs incurred per product. To find the weighted average for the different products, their proportions are multiplied by their contribution margins in the total product mix.