Formula to Calculate Break Even Point

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Break-Even Point Calculator

Calculate the exact volume of sales needed to cover your total costs.

Rent, salaries, insurance, etc.
Revenue per item sold.
Materials, labor, shipping, etc.

Calculation Results

Break-Even Point (Units): 0
Break-Even Sales ($): $0.00
Contribution Margin per Unit: $0.00

Understanding the Break-Even Point Formula

The break-even point (BEP) is a critical financial metric for any business. It represents the stage where total revenue equals total expenses, meaning your business is neither making a profit nor a loss. Identifying this point helps business owners set sales targets, price products effectively, and manage fixed and variable costs.

The Basic Break-Even Formula

To calculate the break-even point in units, use the following formula:

Break-Even Point (Units) = Total Fixed Costs / (Price per Unit – Variable Cost per Unit)

Key Components Explained

  • Fixed Costs: These are expenses that remain constant regardless of how many units you sell. Examples include office rent, administrative salaries, and equipment leases.
  • Variable Costs: These costs fluctuate directly with production volume. This includes raw materials, packaging, and direct labor.
  • Contribution Margin: This is the Selling Price per Unit minus the Variable Cost per Unit. It represents how much each sale contributes to covering fixed costs.

Practical Example

Imagine you run a candle business with the following monthly figures:

  • Fixed Costs: $2,000 (Rent and utilities)
  • Selling Price per Candle: $25
  • Variable Cost per Candle: $10 (Wax, wick, jar)

Step 1: Calculate Contribution Margin: $25 – $10 = $15.

Step 2: Apply the formula: $2,000 / $15 = 133.33 units.

In this scenario, you must sell 134 candles per month to start generating profit.

function calculateBreakEven() { var fixedCosts = parseFloat(document.getElementById("fixedCosts").value); var sellingPrice = parseFloat(document.getElementById("sellingPrice").value); var variableCost = parseFloat(document.getElementById("variableCost").value); var errorBox = document.getElementById("errorBox"); var resultsArea = document.getElementById("resultsArea"); // Reset visibility errorBox.style.display = "none"; resultsArea.style.display = "none"; // Validation if (isNaN(fixedCosts) || isNaN(sellingPrice) || isNaN(variableCost)) { errorBox.innerHTML = "Please enter valid numeric values for all fields."; errorBox.style.display = "block"; return; } if (sellingPrice <= variableCost) { errorBox.innerHTML = "Selling price must be greater than the variable cost per unit to achieve a break-even point."; errorBox.style.display = "block"; return; } if (fixedCosts < 0 || sellingPrice < 0 || variableCost < 0) { errorBox.innerHTML = "Values cannot be negative."; errorBox.style.display = "block"; return; } // Logic var contributionMargin = sellingPrice – variableCost; var bepUnits = fixedCosts / contributionMargin; var bepSales = bepUnits * sellingPrice; // Display document.getElementById("bepUnits").innerText = Math.ceil(bepUnits).toLocaleString() + " Units"; document.getElementById("bepSales").innerText = "$" + bepSales.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2}); document.getElementById("contMargin").innerText = "$" + contributionMargin.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2}); resultsArea.style.display = "block"; }

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