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    The Art of Negotiation

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            The break-even point is the level of operations to which the income of a company and costs incurred are exactly the same.
    In the break-even point, a company would not have neither an operational income nor an operational loss. The break-even point is useful in planning for the company, especially when there is an expansion or reduction of operations. To illustrate the calculation of the break-even point, assuming that the fixed costs for the company America, Inc. are estimated at $90,000. The sales unit price, variable unit cost, and unit contribution margin for the company mentioned are as follows:

    Sale unit price                  $25
    Variable unit cost             $15
    Contribution margin of $10 per unit

            The sales break-even are 9,000, which are calculated using the following equation:

                               Fixed Costs
             Break-Even Point (units) = ----------------------------------
                                                              Contribution margin per unit

    Break-Even Point (units) = ($90,000 / $10) = 9,000 units

            The following income statement confirms the above calculation:

    Sales (9,000 units X $25)
    (-) Variable Costs
    (9,000 X $15)
    Contribution margin
    (-) Fixed Costs
    Operational Income


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