# Price Calculation: Breakeven Pricing

## Student Discussion Activity

Often a firm will calculate the break-even point for a price. That is, if we set the price at \$X, then how many units will we need to sell to cover costs (that is, our break-even point).

Work through the following two examples to gain a better understanding of this approach.

Using break-even analysis:

1. How many units need to be sold to break-even if the product is sold for \$30?
1. How many units need to need to be sold to break-even if the product is sold for \$15?
 No. of Units Allocated Fixed Costs Variable Cost/Unit Total Production Cost Average Unit Cost Unit Price Total Sales Revenue Gross Profit 500 \$10,000 \$10 1,000 \$10,000 \$10 1,500 \$10,000 \$10 2.000 \$10,000 \$10 2,500 \$10,000 \$10

### Student Discussion Questions

1. Start by completing the above table.
2. How would the firm use this break-even information?
3. What do you think you would set first: the sales target or the price? Why?
##### Related Activities

What Price Mark-up is Needed?

Price Calculations – Marginal Analysis

Price Calculation: Target Profit Pricing