Determine the exact volume of sales needed to cover your business costs.
Rent, salaries, utilities, insurance.
The price customers pay per item.
Materials, labor, shipping per unit.
Calculation Analysis
Break-Even Units:
Break-Even Sales ($):
Contribution Margin per Unit:
Please ensure Sales Price is higher than Variable Cost to achieve a break-even point.
Understanding the Break-Even Point (BEP)
The Break-Even Point is one of the most critical metrics for any business owner, startup founder, or financial analyst. It represents the stage where total costs (fixed and variable) are exactly equal to total revenue. At this point, your business is making zero profit, but also zero loss. Every unit sold beyond this point contributes directly to your net profit.
The Break-Even Formula
To calculate the break-even point in units, we use the following formula:
Break-Even Units = Fixed Costs / (Sales Price per Unit – Variable Cost per Unit)
Key Components
Fixed Costs: Expenses that do not change regardless of how many units you sell (e.g., rent, insurance, office salaries).
Variable Costs: Costs that increase directly with production volume (e.g., raw materials, packaging, sales commissions).
Contribution Margin: This is the Sales Price minus the Variable Cost. It is the amount of money each unit "contributes" toward covering your fixed costs.
Example Calculation
Imagine you run a candle business:
Fixed Costs: $2,000 per month (Studio rent and equipment).
Sales Price: $25 per candle.
Variable Cost: $10 per candle (Wax, wick, jar).
Your Contribution Margin is $15 ($25 – $10). To find the break-even point: $2,000 / $15 = 133.33 candles. You must sell 134 candles per month to start turning a profit.
function calculateBreakEven() {
var fixedCosts = parseFloat(document.getElementById("fixedCosts").value);
var salesPrice = parseFloat(document.getElementById("salesPrice").value);
var variableCosts = parseFloat(document.getElementById("variableCosts").value);
var resultDisplay = document.getElementById("resultDisplay");
var errorDisplay = document.getElementById("errorDisplay");
var unitResult = document.getElementById("unitResult");
var revenueResult = document.getElementById("revenueResult");
var marginResult = document.getElementById("marginResult");
// Reset displays
resultDisplay.style.display = "none";
errorDisplay.style.display = "none";
// Validation
if (isNaN(fixedCosts) || isNaN(salesPrice) || isNaN(variableCosts)) {
alert("Please enter valid numbers in all fields.");
return;
}
if (salesPrice <= variableCosts) {
errorDisplay.style.display = "block";
errorDisplay.innerHTML = "Error: Sales price must be greater than variable costs. If your costs are higher than your price, you will never break even.";
return;
}
// Calculation
var contributionMargin = salesPrice – variableCosts;
var bepUnits = fixedCosts / contributionMargin;
var bepRevenue = bepUnits * salesPrice;
// Display
unitResult.innerHTML = Math.ceil(bepUnits).toLocaleString() + " Units";
revenueResult.innerHTML = "$" + bepRevenue.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
marginResult.innerHTML = "$" + contributionMargin.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2}) + " per unit";
resultDisplay.style.display = "block";
resultDisplay.scrollIntoView({ behavior: 'smooth', block: 'nearest' });
}