How to Use Break Even Point Calculator
Enter the fixed cost, variable cost and the price per product and press calculate.
Break Even Point Calculator
How to calculate break-even point
Breakeven point formula
: Fixed Costs ÷ (Price - Variable Costs)
- A company wishes to purchase a competitors company, first they want to ensure the break-even point is not too high.
- After researching the competitor we find that the fixed costs each month are $5,545
- The variable cost is $3
- The selling price of the product is $7.00
- Using the formula above: 5,545 / (7 -3) = 1386.25
- 1387 units need to be sold a month to break even.
- A company sells burgers and are researching their break-even point for each month.
- The fixed costs rent, salaries, utilities etc is $7,000.
- All the burger ingredients (variable costs) costs $4.70 a burger.
- The burgers are sold at $10
- We use the break-even point formula: 7000/(10 - 4.70) = 1320.75
- 1321 burgers must be sold each month to break even
Break even point is the point where total cost is equal to total revenue, where there is no profit or loss. It is possible for a business to have a high revenue while still making a loss. Once a business knows the break even point it is often used to help with budgets, business plans and deciding prices of products.
There are many valuable things obtained from knowing your break even point:
- How profitable a product is with its associated costs
- The number of units that need to be sold before a profit is made
- How price changing will affect profit
- If a change in cost occurs you can recalculate how many units need to be sold
The purpose of doing break-even analysis is to calculate the minimum units sold for a business to make a profit, it provides a good view of costs, sales and profits.
Reducing the break-even point should be done whenever possible. Keep an eye on fixed costs, check if any costs can be stopped, such as a cheaper rent for a similar space. Outsourcing is another option that can help reduce fixed costs. Also review variable costs for any extra costs you may be able to eliminate.
There are 3 things needed to calculate a break-even point:
- The selling price of the product
- Fixed costs - renting,salaries, utilities, insurance etc
- Variable costs - cost of the products production