Break-Even Point Calculator

Know Your Path to Profitability

The break-even point is the level of sales at which a business's revenues equal its total costs. At this point, the business is neither making a profit nor a loss. This calculator helps business owners and entrepreneurs determine how many units of a product they need to sell to cover all their costs.

The Break-Even Formula Explained

Break-Even Point (in Units) = Total Fixed Costs / (Sale Price Per Unit - Variable Cost Per Unit)

• Fixed Costs: Costs that do not change with the number of units produced (e.g., rent, salaries, insurance).
• Sale Price Per Unit: The price at which you sell one unit of your product.
• Variable Cost Per Unit: The costs that change directly with the number of units produced (e.g., raw materials, direct labor).
• (Sale Price - Variable Cost): This is known as the Contribution Margin per Unit.

How to Use the Calculator

1. Total Fixed Costs: Enter your total fixed costs for a given period (e.g., monthly).
2. Variable Cost Per Unit: Enter the cost to produce one unit.
3. Sale Price Per Unit: Enter the price you sell one unit for.

Real-World Example

A small business has monthly fixed costs of $5,000. Each product they make has a variable cost of $10 and sells for $30.

• Fixed Costs: $5,000
• Variable Cost: $10
• Sale Price: $30
• Contribution Margin: $30 - $10 = $20
• Break-Even Point: $5,000 / $20 = 250 units.
• The business needs to sell 250 units per month to cover all its costs.

Frequently Asked Questions (FAQ)

• Why is the break-even point important? It's a crucial part of a business plan. It helps in setting prices, managing costs, and determining sales goals. It answers the fundamental question: "How much do I need to sell to start making a profit?"
• Can I calculate the break-even point in sales dollars? Yes. Once you have the break-even point in units, you can multiply it by the sale price per unit. In the example above, the break-even point in sales dollars would be 250 units * $30/unit = $7,500.
• What if my sale price is lower than my variable cost? If your sale price is lower than your variable cost, you lose money on every single unit you sell, and it will be impossible to ever break even.