If the variable costs increase at the same rate as the production or sales volume, they are referred to as proportional variable costs. As a result, variable costs fluctuate and are performance related. The amount of variable costs is dependent on the volume that is produced and/or sold. The BeP for several products or for an entire company will be specified, in contrast, as the amount of turnover that must be earned in total (multi-product analysis).Ĭolloquially, BeP also refers to the time at which a company breaks even. If you want to determine the BeP for a single product, it will be specified as a quantity of items (single-product analysis). At the break-even point, the company makes neither a profit nor a loss. The BeP threshold separates the loss zone from the profit zone. If costs and turnover are at the same level, the company has reached the break-even point threshold. Should turnover increase over time, the company will move closer to the profit zone. This means that the company is initially situated in the loss zone. During the first few years, costs are often higher than turnover. And sufficiently high turnover is in most cases not generated right after the company is founded. But this is only achieved when revenue is higher than costs. Every business professional would like to eventually generate profit.
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