Breakeven point refers to the level of sales at which total revenue equals total costs, resulting in zero profit or loss. It represents the minimum amount of sales needed to cover all fixed and variable expenses. Fixed costs include rent, salaries, and utilities that remain constant regardless of sales volume.
Variable costs, on the other hand, fluctuate with sales, such as inventory, packaging, and commissions. By determining the breakeven point, retailers can assess the minimum sales target required to cover their expenses and make informed decisions regarding pricing, cost management, and profitability.
Beyond the breakeven point, each additional sale contributes to profit. Understanding this critical threshold helps retailers gauge their financial performance and set realistic goals for achieving profitability.
