Use this powerful Break-Even Point Calculator to determine the quantity, price, variable cost, or fixed cost required to achieve your break-even point. Simply leave the variable you want to solve for blank.
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Calculated Result:
—Detailed Steps
steamdb calculator Formula: Break-Even Point
The core BEP formulas are as follows:
1. Break-Even Quantity (Q) = F / (P – V)
2. Fixed Costs (F) = Q × (P – V)
3. Selling Price (P) = V + (F / Q)
4. Variable Cost (V) = P – (F / Q)
Formula Sources: Investopedia: Break-Even Point, CFI: Break-Even Analysis
Variables Explained
- Quantity (Q): The total number of units that must be sold to cover all costs.
- Selling Price per Unit (P): The revenue generated from selling one unit of the product or service.
- Variable Cost per Unit (V): The cost directly associated with producing one unit (e.g., raw materials, direct labor).
- Total Fixed Costs (F): Costs that do not change with the level of production (e.g., rent, salaries, depreciation).
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What is the Break-Even Point (BEP)?
The Break-Even Point (BEP) is the point at which total cost and total revenue are equal, meaning there is no net loss or gain, and one has “broken even.” In other words, all costs that must be paid are covered by the revenue generated.
Understanding your BEP is crucial for business planning, pricing strategies, and budget management. It provides a target for sales volume and helps management determine the minimum sales activity needed to prevent a financial loss.
Any sales above the BEP will result in profit, while sales below the BEP will incur a loss. This analysis helps businesses assess the margin of safety—the difference between expected sales volume and the break-even sales volume.
How to Calculate the Break-Even Quantity (Example)
Let’s find the required Quantity (Q) needed to break even, given the following data:
- Selling Price (P) = $50
- Variable Cost (V) = $30
- Fixed Costs (F) = $100,000
- Calculate the Contribution Margin: Contribution Margin = P – V = $50 – $30 = $20.
- Apply the BEP Formula: Break-Even Quantity (Q) = F / Contribution Margin.
- Substitute Values: Q = $100,000 / $20.
- Final Result: Q = 5,000 units. The business must sell 5,000 units to cover all fixed and variable costs.
Frequently Asked Questions (FAQ)
If P < V, the contribution margin (P – V) is negative. This means every unit sold generates a loss, and a break-even point is mathematically impossible to reach without changing price or costs.
No. Q must be a positive physical value. If the calculation yields a negative result, it indicates that the input parameters (like a negative Fixed Cost) are physically nonsensical for a real-world scenario.
An increase in Fixed Costs (F) directly raises the numerator in the Q formula, which requires a proportionally higher Quantity (Q) to be sold to reach the break-even point.
BEP in units (Q) tells you *how many items* to sell. BEP in sales dollars tells you the *total revenue* required to break even (Q multiplied by P).