equation method Definition | Business Dictionaries from AllBusiness.com
Facebook Twitter Google+ You Tube RSS Feed
data-override-format="true" data-page-url = "http://www.allbusiness.com">

Business Glossary


Business Definition for: equation method
equation method

method used to find the break-even point or target income volume in Cost-Volume-Profit (CVP) Analysis or break-even analysis . The equation is:

Sales = Variable Costs + Fixed Costs + Net Income

Let p = unit selling price, x = volume, v = unit variable cost, and FC = total fixed costs; the equation becomes
px =vx +FC+Net Income

At the break-even volume, px = vx + FC + 0. To find the break-even point in units, simply solve the equation for x. Assume p= $250, v = $150, andFC = $35,000. Then the equation is:
250x = $150x + $35,000 + 0
$100x = $35,000
x = 350 units
Copyright © 2005, 2000, 1995, 1987 by Barron's Educational Series, Inc., Reprinted by arrangement with Publisher.


Weekly Roundup

Sign up for our weekly Experts roundup, delivered to your inbox each Saturday morning.

Most Recent From our Experts

AllBusiness Experts

AllBusiness Greatest Hits


Real Business Owners, Real Business Advice!

Sign up for practical, real-world solutions from successful business owners delivered to your inbox each Saturday morning. FREE.