Break-Even Point Calculator
Determine exactly how many units you need to sell to cover your costs.
Please ensure the Sales Price is higher than the Variable Cost.
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Total sales revenue to break even:
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Understanding the Break-Even Point (BEP)
The Break-Even Point (BEP) is the stage where a business's total expenses and total revenue are equal. At this point, there is no net loss or gain. Calculating your BEP is essential for setting sales targets, pricing products, and determining the viability of a new business model.
The Formula for Break-Even Analysis
To calculate the break-even point in units, we use the following formula:
BEP (Units) = Fixed Costs / (Sales Price per Unit – Variable Cost per Unit)
- Fixed Costs: Expenses that remain constant regardless of production volume (e.g., rent, insurance, office salaries).
- Variable Costs: Expenses that fluctuate with production (e.g., raw materials, packaging, direct labor).
- Contribution Margin: This is the Sales Price minus Variable Cost. It represents the portion of sales revenue that helps cover fixed costs.
Example Calculation:
Imagine you sell handmade candles. Your monthly rent and tools cost $2,000 (Fixed Costs). Each candle costs $5 to make (Variable Cost) and you sell them for $25 each.
Contribution Margin = $25 – $5 = $20.
Break-Even Point = $2,000 / $20 = 100 Candles.
Imagine you sell handmade candles. Your monthly rent and tools cost $2,000 (Fixed Costs). Each candle costs $5 to make (Variable Cost) and you sell them for $25 each.
Contribution Margin = $25 – $5 = $20.
Break-Even Point = $2,000 / $20 = 100 Candles.
Why is this Important for SEO and Growth?
Knowing your break-even point allows you to perform "What-If" analysis. For instance, if you increase your marketing budget (increasing fixed costs), you can instantly see how many more units you must sell to justify the investment. It also helps in identifying the Margin of Safety, which is the difference between your actual sales and the break-even point.