Break-even cost is the point where cost and revenue per unit are the same, which means there is neither a profit nor a loss. Break-even cost of production is the lowest price that can be charged for a product and still cover all costs of production. Once the market price for the product and average cost per unit is calculated, these data can be used to estimate a cash flow analysis. This information on start-up costs can be used to determine the amount of money needed for each year the business continues to operate. This should be done before talking with financial lending sources.
People invest in a new business or product with the idea of making a profit.
It is important to know how much profit will be earned for each product or enterprise over several years. Gross income from sales is the amount of money resulting from the sale of the product or products. Net profit is the money left after all costs are deducted from gross sales and all taxes are paid. Profits are not estimated from the sale of one unit but are estimated over a given time period, usually one year. The sale of a few units, when the average price per unit is below average cost of production, is not profitable.