![]() Break-even analysis exampleĪ break-even analysis is most easily done using a graphical representation of the quantities involved, which is why our calculator also produces a chart with all of them plotted. It makes the difference from operating at a loss to achieving financial goals and expanding production. Having a successful business can be easier and more achievable when you have this information. This analysis can also serve as a much needed advisor on cutting costs and fixing selling prices. Knowing this, you can then regulate your marketing activity if you decide your sales are lower than expected, or just wish to reach the target sooner. If you have specified your sales expectations, you will even see how much time it will take to reach the BEP.Ĭalculating the break-even point helps you determine how much you will have to sell before you can make profit. The algorithm does the rest for you – it automatically calculates your profit margin and markup, and your break-even point both in terms of units sold and cash revenue. To make the analysis even more precise, you can input how many units you expect to sell per month. All you need to do is provide information about your fixed costs, and your cost and revenue per unit. However, it might be too complicated to do the calculation, so you can spare yourself some time and efforts by using this Break-even Calculator. No matter whether you are a business owner, accountant, entrepreneur or even a marketing specialist – you will often come across this metric, which is why our online calculator is so handy. The break-even point is an extremely important starting goal to work towards. We use the formulas for number of units, revenue, margin, and markup in our break-even calculator which conveniently computes them for you. This is a step further from the base calculations, but having done the math on BEP beforehand, you can easily move on to more complex estimates. Number of sold units that provide the desired profit = Desired profit / Contribution margin per unit + Break-even point measured in units. Where the contribution margin ratio is equal to the contribution margin divided by the revenue.Īnother way to estimate the break-even point in dollars is to refer to the one in units:īreak-even point measured in $ = Selling price of a unit x Break-even point measured in units.įinally, we will look at the formula that helps you calculate how many units you have to sell in order to reach your desired profit: However, if you want to calculate your break-even point in a purely financial expression, you can go with this formula:īreak-even point measured in $ = Total fixed costs / Contribution margin ratio, The fixed costs are a total of all FC, whereas the price and variable costs are measured per unit. In this case, you estimate how many units you need to sell, before you can start having actual profit. Having information about all three of these aspects, you can calculate your break-even point using the formula:īreak-even point measured in units = Total fixed costs / (Selling price of a unit – Variable costs per unit). On the other hand, variable costs are largely dependent on the volume of work at hand – if you have more clients, you will need more labor, which equals a rise in variable expenses. Your fixed costs are not influenced by the amounts you sell. The break-even analysis relies on three crucial aspects of a business operation – selling price of a unit, fixed costs and variable costs. Our break-even calculator is a useful tool to refer to when determining prices for the goods and services you offer, deciding on budgets or simply working on a business plan. In other words, it is the moment when your total costs are finally covered by your total revenue. The B/E point is a metric that shows you how much sales you need to reach before you begin realizing profit. When operating a business, one of the most important analytical tools you will come to use is the break-even analysis.
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