Break-even calculator

Break-even calculator
Break-even calculator

Description

This tool allows you to determine the break-even point (BEP) or break-even level, the minimum number of units a company must sell to cover total costs, consisting of both fixed and variable costs to the company.

The main purpose of break-even analysis is to determine the minimum output that must be exceeded for a business to profit.

Total profit at the break-even point is zero.

The BEP is calculated as follows:

  • Total Costs = Total Revenue
  • Price per unit x BEP = Total Fixed Costs + Variable Unit Cost x BEP
  • (Price per unit – Variable Unit Cost) x BEP = Total Fixed Costs
  • BEP = Total Fixed Costs / (Price per unit – Variable Unit Cost)

The quantity “Price per unit – Variable Unit Cost” is called the Unit Contribution Margin: it is the marginal profit per unit, or alternatively the portion of each sale that contributes to Fixed Costs.

Instructions

  • Enter the company’s fixed costs or overhead: Business expenses that do not depend on the level of goods or services produced by the business.
  • Enter the selling price per unit.
  • Enter the variable cost per unit. Variable costs are expenses that fluctuate proportionally with the quantity of output.
  • The BEP or break-even point will appear automatically below.

Important

    • You can get additional help by hovering over the symbol “?”
    • References: Break-even point

Text is available under the Creative Commons Attribution-ShareAlike 3.0 Licence.