Break Even Analysis

 

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DEFINITIONS

Variable unit cost: Cost per associated with producing an additional unit.
Fixed cost: The sum of all costs required produce any product. This amount does not change as production increases or decreases
Expected unit sales: The number of units that are expected to be sold.
Price: Price you will be able to receive per unit.
Total variable costs: The product of units produced and variable unit cost (example 10 units at $5 variable cost produces a total variable cost of $50).
Total costs: Sum of fixed costs and variable costs.
Total revenue: Product of price and expected sale unit sales (example 10 units at $10 equals $100 total revenue.
Profit: Total revenue minus total costs.
Break even: Number of units required to sell to make a profit of zero.

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