Break-Even Analysis
The Break-Even Analysis, or simply BEA, is a mathematical computation that helps a business identify the point from which it becomes profitable (break-even point). Simply put, it tells a business at what point it covered all the cost of doing business, and subsequently, starts making profits.
This break even calculator allows a business to accomplish the following:
- Determine the quantity it needs to produce or sell in order to break-even;
- Determine the selling price it needs to charge for a specific quantity you sell in order to break-even.
Definitions and terms used in the Break-Even Analysis (BEA)
- Selling Price per Unit: the price that a unit is expected to be sold for.
- Selling Units: the number of units expected to be sold (determined by a contract or market research).
- Fixed Cost (FC): the cost that remains constant within a range of production or sales, regardless of the number of units produced or sold within that range. Typical fixed costs are: rent, mortgage, equipment, salaries, insurance, fixed utilities (office utilities) etc.
- Variable Cost per Unit: the cost that vary with the production or the purchase of one unit.
- Break-even point: the point where total revenue (total sales) equal total cost.
- Total Variable Cost (VC): the cost that varies directly with the number of units produced or sold. Typical variable costs are: materials, packaging and shipping, sales commission, hourly wages, variable utilities (factory utilities) etc.
Total Variable Cost = Selling Units x Variable Cost per Unit - Total Cost (TC): total expenses incurred in the process of producing or selling a number of units.
Total Cost (TC) = Fixed Cost (FC) + Total Variable Cost (VC) - Total Revenue: the total sales value of the units produced or sold.
Total Revenue = Selling Units x Selling Price per Unit - Profit: the benefits from producing or selling a number of units.
Profit = Total Revenue - Total Cost
Terms of use
1. Complementarily, in order to calculate the Break Even Point for your business, we offer a calculator free of charge. However, we appreciate a donation if you value our tools and services.
2. You may link to this calculator from your website as long as you give proper credit to
C. C. D. Consultants Inc. and there exists a visible link to our website.
3. Although C. C. D. Consultants Inc.'s personnel has verified and validated the Break Even calculator, C. C. D. Consultants Inc. is not responsible for any outcome derived from its use. The use of the Break Even calculator is the sole responsibility of the user and the outcome is not meant to be used for legal, tax, or investment advice.
