Library

Breakeven Sales Volume

Don Hofstrand (September, 2018)

Summary

Product price can be based on the cost of producing the product. However, there is not a specific price level that you can charge that will assure you that you will cover your costs. Because fixed costs need to be covered regardless of the number of units produced and sold, the number of units you produce and sell determines the price needed to break even. To do this you need to classify the costs into the managerial cost categories of variable and fixed costs.