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)	$225,000
(-) Variable Costs (9,000 X $15)	135,000
Contribution margin	$90,000
(-) Fixed Costs	90,000
Operational Income	$0