Break Even Point Calculator
Calculate how many units you need to sell to cover all costs.
Rent, salaries, insurance, etc.
Revenue earned per item sold.
Materials, shipping, direct labor.
Set to 0 for break-even point.
Units Required
0
Sales Revenue Required
$0.00
Contribution Margin:
0%
Understanding the Break Even Point
The Break Even Point (BEP) is the stage in a business's operations where total revenue equals total costs. At this point, the business is making neither a profit nor a loss. Understanding your BEP is critical for setting prices, managing production levels, and creating a viable business plan.
The Break Even Formula
Break Even Units = Fixed Costs / (Sales Price per Unit – Variable Cost per Unit)
Key Components
- Fixed Costs: Expenses that remain constant regardless of how much you sell (e.g., rent, insurance, office salaries).
- Variable Costs: Expenses that fluctuate directly with production volume (e.g., raw materials, packaging, sales commissions).
- Contribution Margin: The difference between the Sales Price and the Variable Cost. This is the amount of money from each sale that "contributes" toward covering fixed costs.
Example Calculation
Imagine you run a candle business:
- Fixed Costs: $2,000 per month (Studio rent and utilities).
- Sales Price: $25.00 per candle.
- Variable Cost: $10.00 per candle (Wax, wick, scent, glass jar).
Calculation: $2,000 / ($25.00 – $10.00) = 133.33. You must sell 134 candles per month to cover all costs and start making a profit.