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Breakeven analysis

Analysis, Revenue & Margin, Breakeven shows the revenue at which the company covers its costs, and how far above or below it the company is.

How it is calculated

• Breakeven revenue is fixed costs divided by the contribution margin, where the contribution margin is one minus variable costs over revenue.
• The margin of safety is how far current revenue is above breakeven.
• A chart plots revenue against costs with breakeven and now marked, alongside the cost structure and the contribution margin.

Where the fixed and variable split comes from

• When the forecast has classified each cost account as fixed, variable or mixed, breakeven uses that classification, with depreciation and interest as fixed.
• Otherwise cost of sales counts as variable, and operating expenses, depreciation and interest as fixed.

Limits

Breakeven is for the company as a whole, in revenue; it is not calculated per product, customer or segment, or in units.

More in Analysis

• Price, volume and mix
• Customer and product profitability
• Segment reporting
• Quality of revenue and the customer bridge
• Quality of receivables and payables

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