Question

real life break-even point example (for a college student) not the definition but an example of how i use this in my personal life.

Answer 1

To connect with a real life example for a college studant we take an example of book seller.

For example a book seller sells only one type of book with selling price of $ 50 per book while he is buying that book from the auther and publisher on price of $ 40 per book. Now to run his shop he is probablly incurring rent expenses and electricity and other expenses which are not directly related to sells of books, it means even in case he is not able to sale a single book he has to incur this expenses, here we take it as $ 2000.

Now break even point is the number of books that the shopkeeper has to sell to cover at least those fixed expenses of $ 2000.

Here his earning per book (contribution margin) = Selling price less Buying price for him (Sales Price less Variable expenses) = $ 50 - $ 40 = $ 10 per book.

Break even point is $ 2000 divided by $ 10 (Fixed Expenses divided by contribution margin) = 200 books.

So it means shopkeeper has to sale 200 books to conver fixed expenses and it is the point where he is at no profit and no loss.