This break-even calculator allows you to accomplish a job fundamental to any entrepreneurial enterprise. The purpose of break-even analysis is to help you know how many units of goods you need to sell in order to pay all of your outgoing expenditures (cost of goods sold and other, constant costs that are not connected to the quantity of inventory) (cost of goods sold and other, fixed costs that are not tied to the quantity of inventory).
What is the break-even point?
When comparing the market price of an item to its initial cost, the break-even point (break-even price) for a trade or investment is calculated; the break-even point is reached when the two prices are equal.
The break-even point formula in corporate accounting is calculated by dividing all fixed costs connected with manufacturing by revenue per individual unit minus variable expenses per unit. Fixed costs are those that do not fluctuate based on the quantity of units sold in this circumstance. To put it another way, the break-even point is the moment at which a product’s entire revenues equal its total costs.
We can use break-even points in a variety of situations. For example, the break-even point in a property is the amount of money the homeowner needs to make from a sale to completely cover the net purchase price, including closing expenses, taxes, fees, insurance, and mortgage interest as maintenance and home renovation expenditures. At that price, the homeowner would break even, meaning he or she would not make or lose any money.
How to calculate the break-even point>
Determine how much you earn each unit. For example, if you buy something for $20 and sell it for $35, your gross profit per item is $15 (assuming no further per-unit expenditures). Determine your fixed expenses. In this case, we’ll spend $3000. (office rent, utilities, etc.) Divide your fixed expenses by the profit you generate on each unit – $3000 / $15 = 200 – to get the number of units you must sell.
The total sales figure is simple: 200 multiplied by $35 equals 7000.
Break-even point formula
Use the following formula to compute the break-even point in units:
Break-Even point (units) = Fixed Costs ÷ (Sales price per unit – Variable costs per unit)
Break-even point in sales dollars
Divide the fixed costs by the contribution margin when calculating a break-even point based on sales dollars. We can calculate the contribution margin by deducting the variable expenses from the product price. And apply this sum subsequently to the fixed expenses. In terms of sales dollars, use the following formula:
Break-Even point (sales dollars) = Fixed Costs ÷ Contribution Margin
Contribution Margin = Price of Product – Variable Costs
How to calculate the break-even point in units?
Divide fixed expenses by revenue per unit minus variable costs per unit to obtain a break-even point based on units. Fixed costs are those that do not vary regardless of how many units are sold. The revenue is the price at which the product is sold less the variable costs such as labor and materials.
Break-Even Point (Units) = Fixed Costs ÷ (Revenue per Unit – Variable Cost per Unit)
When calculating a break-even point based on sales dollars, consider the following: Subtract the fixed expenses from the contribution margin. Fixed Costs Contribution Margin = Break-Even Point (sales dollars). Contribution Margin = Product Price minus Variable Costs.
Use the following formula to compute the break-even point in units: Break-Even (units) = Fixed Costs (Sales price per unit – Variable costs per unit)
A break-even analysis is a financial computation that compares the expenses of starting a new firm, service, or product to the unit sale price to calculate when you will break even. In other words, it indicates when you will have sold enough units to cover all of your expenditures.