Break Even Point Calculator Free Download

What is Break Even Point?

The break even point is the level of sales or production at which the total revenue equals total costs. At this point, your business neither makes a profit nor incurs a loss. Understanding your break even point helps you plan production, pricing, and sales strategies effectively.

For example, if your fixed costs are $10,000 and your variable cost per unit is $10, then you need to sell 1,000 units to break even. This means that every unit sold beyond 1,000 will contribute to your profit.

How to Calculate Break Even Point

Calculating the break even point involves determining your fixed costs and variable costs. Fixed costs are expenses that do not change with the level of production, such as rent and salaries. Variable costs are expenses that vary directly with the level of production, such as materials and labor.

Once you have these figures, you can use the break even point formula to determine the number of units you need to sell to cover all costs.

Formula

Where:

• Fixed Costs are the costs that do not change with the level of production.
• Selling Price per Unit is the price at which you sell each unit of your product.
• Variable Cost per Unit is the cost to produce each unit of your product.

Example Calculation

Let's say you have the following figures:

• Fixed Costs: $10,000
• Selling Price per Unit: $50
• Variable Cost per Unit: $30

Using the formula:

This means you need to sell 500 units to cover all your costs and start making a profit.

Interpretation

The break even point is a critical metric for businesses. It helps you understand how many units you need to sell to cover your costs. Once you reach the break even point, every additional unit sold contributes to your profit.

For example, if your break even point is 500 units and you sell 600 units, you will have a profit of $50 per unit (selling price minus variable cost) multiplied by 100 units (600 - 500).