Break-Even Calculator

Calculate how many units your business needs to sell to cover all costs and start making a profit.

Calculate Your Break-Even Calculator

Results

Break-Even Point

1,000 units

Profit at 1,500 units

$5,000

Contribution Margin Per Unit

$10.00

What is a Break-Even Analysis?

Break-even analysis is a financial calculation that determines the break-even point (BEP) - the point at which total costs and total revenue are equal. At the break-even point, a business has neither made a profit nor incurred a loss.

How to Calculate Break-Even Point

The formula to calculate the break-even point in units is:

Break-Even Point (units) = Fixed Costs ÷ (Price Per Unit - Variable Cost Per Unit)

The denominator (Price - Variable Cost) is known as the contribution margin per unit - the amount each unit contributes to covering fixed costs and generating profit.

Understanding the Results

  • Break-Even Point: This is the number of units you need to sell to cover all costs. At this point, you're neither making profit nor loss.
  • Profit/Loss: This shows whether you'll make a profit or incur a loss at your specified number of units.
  • Contribution Margin: This is how much each unit contributes toward covering fixed costs and generating profit.

Business Applications

Break-even analysis helps businesses in several ways:

  • Pricing products appropriately
  • Setting sales targets
  • Making decisions about new products or services
  • Planning production levels
  • Evaluating the impact of cost changes

Frequently Asked Questions

If your variable cost per unit exceeds your selling price, you'll lose money on each unit sold, and you'll never break even. In this scenario, you should consider increasing your price, finding ways to reduce variable costs, or reassessing the viability of the product.

You can lower your break-even point by: (1) Reducing fixed costs, (2) Increasing your selling price, or (3) Decreasing variable costs per unit. Each approach has different implications for your business strategy.

Basic break-even analysis typically doesn't account for taxes. For a more comprehensive analysis, you can include taxes as part of your fixed costs or adjust your calculations to account for after-tax profits.

You should recalculate your break-even point whenever there are significant changes in your fixed costs, variable costs, or pricing strategy. Many businesses perform this analysis quarterly or annually as part of their financial planning.

For multiple products, you'll need to calculate a weighted average contribution margin based on your sales mix. Alternatively, you can perform separate analyses for each product line to get more detailed insights.

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