|Fixed Cost ($)||Variable Cost Per Unit ($)||Sales Price Per Unit ($)|
|Break Even Units||Break Even Sales ($)|
How to use this Break Even Point Calculator?
– Enter the value of Fixed Cost for the desired production and sales period.
– Enter the value of Variable Cost and Sales Price Per Unit.
– Press CALCULATE to calculate the units of products and sales required to reach the break even point.
– Click RESET to reset the entered values and start a new calculation. (You can also start new calculation without pressing RESET)
– This Break Even Point Calculator makes your repetitive calculation simple.
You can add this Break Even Point Calculator to your website. Click below to get the code.
What is Break Even Point?
Break Even Point is the volume of sales that makes total cost and total revenue equal and all the sales after the break even generate profit. In other words, the break even analysis helps to determine the units of product must be sold in order to cover the fixed and variable cost associated with that production. The first step of calculating the break-even point is finding out the total fixed cost and the variable cost. Then the break even sales volume is calculated by using the expression: fixed costs / (price -variable costs per unit). This simple expression is very helpful and holds valuable information for business owners and entrepreneurs.
- Break even point is essential to estimate the minimum total products required to produce.
- When compared with the market demand of the product, the break even units suggest whether the business is profitable or not.
- It also helps to check the state of profitability during sales and suggests to determine the degree of marketing required to reach the minimum sales.
- Break even analysis helps to set the price of the product from the perspective of the producer.
- It helps to find out the optimal fixed and variable cost combination.
- There is neither loss nor profit at the point of break even.
- Break even point can be used to calibrate the performance of different marketing strategies.
How to Calculate Break Even Point?
Break Even Point is simply calculated by equating total revenue with the total cost. If Q is the sales unit, P is per unit price and V is variable cost per unit, then
Total Cost (TC) = Fixed Cost (FC) + Variable Cost (VC) = FC + Q * V ——– (1)
Total Revenue (TR) = Q * P ——– (2)
If we equate (1) and (2), we get break even point of quantity.
FC + Q * V = Q * P
Q * (P – V) = FC
Q = FC / (P – V) ——– (3)
The expression (3) represents the formulation to calculate the break even point expressed as:
Break Even Units of Sales (Q) = Fixed Cost (FC) / (Per Unit Price(P) – Per Unit Variable Cost(V) )
The difference between per unit price and per unit variable cost (P – V) is also known as Unit Contribution Margin (C).
Now, the expression (3) becomes
Q = FC / C
The revenue or total sales in which the break even occurs is calculated by multiplying break even quantity (Q) with per unit price (P).
Break Even in Sales ($) = (FC / C) * P
You can check these expressions and above calculator at the same time to validate your results.