Break-Even Point Calculator
Determine exactly how many units you need to sell to cover all your costs and reach profitability.
Analysis Results
What is a Break-Even Point?
In business accounting, the break-even point (BEP) is the production level where total revenues equal total expenses. At this specific point, your business is neither making a profit nor losing money. Every dollar earned beyond this point contributes directly to your net profit.
How the Calculation Works
To find your break-even point, you must distinguish between two types of costs:
- Fixed Costs: Expenses that remain the same regardless of how much you sell (e.g., rent, administrative salaries, insurance, utilities).
- Variable Costs: Expenses that fluctuate directly with production volume (e.g., raw materials, packaging, direct labor, shipping costs).
The formula used by this calculator is:
Break-Even Units = Total Fixed Costs / (Price Per Unit - Variable Cost Per Unit)
Real-World Example
Imagine you run a small business selling custom coffee mugs:
- Fixed Costs: $2,000 per month (Studio rent + Software).
- Sales Price: $25.00 per mug.
- Variable Cost: $10.00 per mug (Plain mug cost + Printing ink + Box).
First, calculate the Contribution Margin: $25.00 – $10.00 = $15.00.
Then, divide fixed costs by that margin: $2,000 / $15.00 = 133.33 units.
This means you must sell at least 134 mugs every month to start making a profit.
Why Break-Even Analysis Matters
Conducting a regular break-even analysis helps business owners make informed decisions about pricing, marketing budgets, and scaling. It answers critical questions like: "Is my product priced too low?" or "Can I afford to increase my monthly rent?" By knowing your BEP, you can set realistic sales targets for your team and manage your cash flow more effectively.