{"id":2211,"date":"2019-09-12T13:33:00","date_gmt":"2019-09-12T13:33:00","guid":{"rendered":"https:\/\/analystprep.com\/cfa-level-1-exam\/?p=2211"},"modified":"2026-03-23T16:47:25","modified_gmt":"2026-03-23T16:47:25","slug":"operating-breakeven-quantity-sales","status":"publish","type":"post","link":"https:\/\/analystprep.com\/cfa-level-1-exam\/corporate-finance\/operating-breakeven-quantity-sales\/","title":{"rendered":"Operating Breakeven Quantity of Sales"},"content":{"rendered":"\n<script type=\"application\/ld+json\">\n{\n  \"@context\": \"https:\/\/schema.org\",\n  \"@type\": \"QAPage\",\n  \"mainEntity\": {\n    \"@type\": \"Question\",\n    \"name\": \"Operating breakeven quantity calculation\",\n    \"text\": \"A company has fixed operating costs of $7,500. The price per unit is $13.30, and the variable cost per unit is $7.50. What is the operating breakeven quantity of sales?\\n\\nA. 2,143\\n\\nB. 1,293\\n\\nC. 864\",\n    \"answerCount\": 1,\n    \"acceptedAnswer\": {\n      \"@type\": \"Answer\",\n      \"text\": \"The correct answer is B.\\n\\nOperating breakeven quantity = Fixed costs \/ (Price \u2212 Variable cost) = 7,500 \/ (13.30 \u2212 7.50) = 7,500 \/ 5.80 = 1,293 units.\"\n    }\n  }\n}\n<\/script>\n<script type=\"application\/ld+json\">\n{\n  \"@context\": \"https:\/\/schema.org\",\n  \"@type\": \"VideoObject\",\n  \"name\": \"Measures of Leverage (2021 Level I CFA\u00ae Exam \u2013 Reading 34)\",\n  \"description\": \"This video lesson covers corporate finance concepts related to financial leverage, including business, financial, and operating risk. It explains how to calculate and interpret the degree of operating, financial, and total leverage, analyze their impact on net income and return on equity, and compute breakeven sales quantities using contribution margins.\",\n  \"uploadDate\": \"2018-10-24T00:00:00+00:00\",\n  \"thumbnailUrl\": \"https:\/\/img.youtube.com\/vi\/isO1EhUqTn0\/maxresdefault.jpg\",\n  \"contentUrl\": \"https:\/\/www.youtube.com\/watch?v=isO1EhUqTn0\",\n  \"embedUrl\": \"https:\/\/www.youtube.com\/embed\/isO1EhUqTn0\",\n  \"duration\": \"PT15M58S\"\n}\n<\/script>\n\n\n\n<iframe loading=\"lazy\" width=\"560\" height=\"315\" src=\"https:\/\/www.youtube.com\/embed\/isO1EhUqTn0?si=V207vgoZGq7px2cK\" title=\"YouTube video player\" frameborder=\"0\" allow=\"accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share\" referrerpolicy=\"strict-origin-when-cross-origin\" allowfullscreen><\/iframe>\n\n\n<p>The breakeven quantity of sales or just simply breakeven point indicates the number of units of a company\u2019s product that is produced and sold at which point the company\u2019s net income becomes zero. Similarly, we can specify the breakeven point concerning operating profit. This is referred to as the \u201cOperating breakeven point\u201d or \u201cOperating breakeven quantity of sales.\u201d<\/p>\n<h2><strong>Calculating Operating Breakeven Quantity of Sales<\/strong><\/h2>\n<p>At the operating breakeven quantity of sales, Revenues = Operating costs, so mathematically:<\/p>\n<p>$$PQ_{OBE} = VQ_{OBE} + F $$<\/p>\n<p>Where:<\/p>\n<p><em>P<\/em> = price per unit<\/p>\n<p><em>Q<sub>OBE<\/sub><\/em> = number of units produced and sold<\/p>\n<p><em>V<\/em> = variable cost per unit<\/p>\n<p><em>F<\/em> = fixed operating costs<\/p>\n<p>Therefore, rearranging the formula, the operating breakeven quantity of sales,<\/p>\n<p>$$ Q_{OBE}=\\cfrac {F}{P-V} $$<\/p>\n<p>In other words, a company\u2019s operating breakeven quantity of sales is equal to the company\u2019s fixed operating costs divided by the difference between the\u00a0price per unit and variable cost per unit.<\/p>\n<h3><strong>Example: Operating breakeven quantity of sales<\/strong><\/h3>\n<p>Assume a company\u2019s product costs are represented by the figures below.<\/p>\n<p>$$ \\begin{array}{l|r}<br \/>\\text{Price per unit sold} &amp; {$8.00} \\\\ \\hline<br \/>\\text{Variable cost per unit} &amp; {$4.00} \\\\ \\hline<br \/>\\text{Fixed cost per unit} &amp; {$2,500.00} \\\\ \\hline<br \/>\\text{Fixed financing cost} &amp; {$1,200.00} \\\\<br \/>\\end{array} $$<\/p>\n<p>What is the company&#8217;s operating breakeven quantity of sales?<\/p>\n<p><strong>Solution<\/strong><\/p>\n<p>The operating breakeven quantity of sales:<\/p>\n<p>$$ Q_{OBE}=\\cfrac {$2,500}{$8.00-$4.00}=625 \\text{ units} $$<\/p>\n<blockquote>\n<h2><strong>Question<\/strong><\/h2>\n<p>A company has fixed operating costs of $7,500. The price per unit for one of its products is $13.30, and the variable cost per unit is $7.50. The company&#8217;s operating breakeven quantity of sales is <em>closest to<\/em>:<\/p>\n<p>A. 2,143.<\/p>\n<p>B. 1,293.<\/p>\n<p>C. 864.<\/p>\n<p><strong>Solution<\/strong><\/p>\n<p>The correct answer is B.<\/p>\n<p>The operating breakeven quantity of sales can be found using the following formula:<\/p>\n<p>$$ Q_{OBE}=\\cfrac {F}{P-V} =\\cfrac {$7,500}{$13.30-$7.50}= 1,293 \\text{ units} $$<\/p>\n<\/blockquote>\n<p><em>Reading 34 LOS 34e: <\/em><\/p>\n<p><em>Calculate and interpret the operating breakeven quantity of sales<\/em><\/p>\n<div class=\"notes_inv\"><hr \/>\n<p><a href=\"https:\/\/analystprep.com\/cfa-level-1-exam\/corporate-finance\/learning-sessions-curriculum-corporate-finance\/\"><em>Corporate Finance &#8211; Learning Sessions<\/em><\/a><\/p>\n<\/div>","protected":false},"excerpt":{"rendered":"<p>The breakeven quantity of sales or just simply breakeven point indicates the number of units of a company\u2019s product that is produced and sold at which point the company\u2019s net income becomes zero. Similarly, we can specify the breakeven point&#8230;<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[6],"tags":[],"class_list":["post-2211","post","type-post","status-publish","format-standard","hentry","category-corporate-finance","blog-post","no-post-thumbnail","animate"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v26.9 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Operating Breakeven Sales Quantity | CFA Level 1<\/title>\n<meta name=\"description\" content=\"Learn how to calculate the operating breakeven sales quantity, the point at which a company covers its fixed and variable costs but earns zero profit.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" 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