Income Mortgage Calculator

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Business Break-Even Point Calculator

Determine exactly how many units you need to sell to cover all your costs.

Rent, salaries, insurance, etc.
Materials, labor per unit, etc.
The price you charge customers.
Desired profit above costs.
Analysis Results
Contribution Margin per Unit:
Contribution Margin Ratio:
Break-Even Point (Units):
Break-Even Sales Revenue:
Units Needed for Target Profit:
Revenue Needed for Target Profit:

What is a Break-Even Point?

The break-even point (BEP) in business is the production level where total revenues equal total expenses. In other words, it is the moment your business stops losing money and starts becoming profitable. Every dollar earned beyond the break-even point is pure profit.

Why Calculate Your Break-Even Point?

Understanding your BEP is fundamental for pricing strategies, financial planning, and risk management. It helps you answer critical questions such as:

  • Is my current pricing model sustainable?
  • How many products must I sell to pay my rent and employees?
  • What happens to my profit if I reduce my variable costs by 10%?
  • Can I afford to lower my prices to beat a competitor?

The Break-Even Formula

To calculate the break-even point manually, you use the following formulas:

1. Contribution Margin = Selling Price per Unit – Variable Cost per Unit

2. Break-Even Point (Units) = Total Fixed Costs / Contribution Margin

3. Break-Even Sales = Break-Even Units × Selling Price per Unit

Real-World Example

Imagine you run a custom t-shirt business. Your monthly fixed costs (rent, software, utilities) are $2,000. It costs you $10 in materials and labor to make one shirt (variable cost), and you sell each shirt for $25.

  • Contribution Margin: $25 – $10 = $15
  • Break-Even Units: $2,000 / $15 = 133.33 units

In this scenario, you must sell 134 shirts per month to cover all your costs. Starting from the 135th shirt, you are making a profit.

Key Components Explained

Fixed Costs

These are expenses that remain constant regardless of how many units you sell. Common examples include office rent, administrative salaries, insurance, property taxes, and equipment leases.

Variable Costs

These costs fluctuate in direct proportion to your production volume. Examples include raw materials, packaging, shipping fees, and sales commissions. The more you produce, the higher your total variable costs will be.

Contribution Margin

This is the amount of money left over from each sale after paying the variable costs. This "margin" goes toward "contributing" to the payment of fixed costs. Once fixed costs are paid, the remaining margin becomes profit.

function calculateBreakEven() { var fixedCosts = parseFloat(document.getElementById('fixedCosts').value); var variableCost = parseFloat(document.getElementById('variableCost').value); var sellingPrice = parseFloat(document.getElementById('sellingPrice').value); var targetProfit = parseFloat(document.getElementById('targetProfit').value) || 0; var errorDiv = document.getElementById('beError'); var resultBox = document.getElementById('beResultBox'); var targetSection = document.getElementById('targetSection'); // Reset displays errorDiv.style.display = 'none'; resultBox.style.display = 'none'; targetSection.style.display = 'none'; // Validation if (isNaN(fixedCosts) || isNaN(variableCost) || isNaN(sellingPrice)) { errorDiv.innerText = "Please enter valid numbers for fixed costs, variable costs, and selling price."; errorDiv.style.display = 'block'; return; } if (sellingPrice 0) { var targetUnits = (fixedCosts + targetProfit) / contributionMargin; var targetRev = targetUnits * sellingPrice; document.getElementById('resTargetUnits').innerText = Math.ceil(targetUnits).toLocaleString() + " units"; document.getElementById('resTargetRevenue').innerText = "$" + targetRev.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2}); targetSection.style.display = 'block'; } resultBox.style.display = 'block'; }

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