Breakeven Example
| Company A | Company B | |
|---|---|---|
| Sales | £1,000,000 | £1,000,000 |
| Cost of Goods Sold | £750,000 | £650,000 |
| Gross Profit | £250,000 | £400,000 |
| Overhead Expenses | £200,000 | £350,000 |
| Net Profit | £50,000 | £50,000 |
| Breakeven Point | 80% | 87.5% |
| Breakeven Date | 18th October | 15th November |
The above example demonstrates why Company A is in a better position than Company B, although both are making a profit of £50,000 on sales of £1 million. Assuming a calendar accounting year: Company A will breakeven by 18 October, whereas Company B will not break even until 15 November. Company A has more variable costs (cost of goods sold) and less fixed costs (overheads).
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