Break-Even Point Calculator
Determine when your business will start making a profit.
Enter Your Business Details
Table of Contents
Break-Even Formula
The break-even point is the point at which total revenue equals total costs, resulting in neither profit nor loss. It's a crucial metric for business planning and decision-making.
How to Calculate Break-Even Point
To calculate the break-even point, follow these steps:
-
1Identify your fixed costs (rent, salaries, etc.)
-
2Calculate your variable costs per unit
-
3Determine your selling price per unit
-
4Calculate the contribution margin per unit
-
5Divide fixed costs by contribution margin to get break-even point
Understanding Contribution Margin
The contribution margin is the amount each unit contributes to covering fixed costs and generating profit. It's calculated by subtracting variable costs per unit from the selling price per unit.
Break-Even Analysis - Practical Examples
Example 1 Small Business
A small business has fixed costs of $10,000 per month, variable costs of $5 per unit, and sells products for $25 each.
Contribution Margin = $25 - $5 = $20 per unit
Break-Even Point = $10,000 / $20 = 500 units
Example 2 Service Business
A service business has fixed costs of $5,000 per month, variable costs of $50 per service, and charges $150 per service.
Contribution Margin = $150 - $50 = $100 per service
Break-Even Point = $5,000 / $100 = 50 services
Example 3 Manufacturing Business
A manufacturing business has fixed costs of $50,000 per month, variable costs of $20 per unit, and sells products for $100 each.
Contribution Margin = $100 - $20 = $80 per unit
Break-Even Point = $50,000 / $80 = 625 units