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Unit 2: Marketing Opportunities and Strategies for Sustainable Farm/Ranch Businesses

Calculating the Break-Even Price.

Break-even price = (Fixed expenses + Variable expenses)/Production or Sales volume

Try it out! Imagine that a farmer calls, saying she doesn’t know how to price rooms at her newly envisioned ag tourism bed and breakfast. But she wants a “fair price that will cover costs.” Help her get started by calculating a break-even price assuming she is able to book 80 rooms or nights per year:

Average annual direct expenses (food, linens, advertising): $794
Average annual overhead expenses (interest on debt, utilities, taxes, insurance, hired labor): $4,215
Number of rooms or nights per year: 80

Use a calculator to figure out the break-even price and then click here to see if you were right.