Break Even Point Calculator: Determine Your Business’s Profitability Threshold
Break-even analysis shows the exact sales volume where revenue equals total cost, so profit begins after that point. Knowing this number helps you price correctly and control expenses. 82 % of failed small firms list cash-flow gaps as a key cause (U.S. Bank, 2022). Use the calculator below to see your break-even units and sales in seconds.
Break Even Point Calculator
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How to use the tool
Fixed Cost – Enter all expenses that stay the same within the period. Sample A: $12,500 quarterly rent & salaries. Sample B: $75,000 annual lease on equipment.
Selling Price per Unit – Price you charge for one unit. Sample A: $60 per gadget. Sample B: $120 per training seat.
Variable Cost per Unit – Cost that changes with each unit produced. Sample A: $25 parts and packaging. Sample B: $55 course hosting & support.
Typical retail contribution margins range 20 %–40 % (Investopedia, 2023).
Manufacturers target a margin above 30 % to offset capital costs (Corporate Finance Institute, 2023).
SBA recommends reviewing break-even every quarter (Small Business Administration, 2022).
Variable costs usually form 60 % of total cost for consumer goods (McKinsey, 2021).
FAQ
What is the break-even point?
The break-even point is the sales volume where total revenue equals fixed plus variable costs, resulting in zero profit (Investopedia, 2023).
How does this calculator compute break-even units?
It divides fixed cost by contribution margin (selling price minus variable cost) and rounds up to the next whole unit, ensuring costs are fully covered (Corporate Finance Institute, 2023).
Why must selling price exceed variable cost?
If price ≤ variable cost, contribution margin is zero or negative, so no number of sales can pay fixed expenses (Harvard Business Review, 2020).
How often should I update my figures?
Update whenever costs or prices shift and at least quarterly to keep forecasts reliable (Small Business Administration, 2022).
How can I lower my break-even point?
Reduce fixed costs (e.g., negotiate rent), cut variable costs through bulk purchasing, or raise prices where the market allows (KPMG Cost Optimization Report, 2021).
Does the tool work for multi-product businesses?
Yes – calculate a weighted average price and variable cost based on your sales mix, then input those figures (Investopedia, 2023).
What is contribution margin?
Contribution margin equals selling price minus variable cost; it “contributes” toward covering fixed costs and profit (Corporate Finance Institute, 2023).
Why does the calculator round up units?
Selling partial units is impossible; rounding up ensures revenue fully offsets total costs even if it slightly exceeds the mathematical break-even (Friedlob & Schleifer, 2019).
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