Break-Even Point Calculator

Understanding the Break-Even Point

The break-even point (BEP) is an important financial metric that shows the number of sales required to cover total costs, both fixed and variable. At this stage, a company breaks even. Understanding your BEP benefits you in making strategic choices regarding pricing, budgeting, and financial forecasting.

How to Calculate the Break-Even Point

The formula for calculating the break-even point in units is:

BEP (units) = Fixed Costs / (Selling Price per Unit – Variable Cost per Unit)

Using the formula:

BEP = $10,000 / ($50 – $30) = 500 units

This means the company needs to sell 500 units to break even.

Interesting Facts about Break-Even Analysis

• Break even analysis originated in the early 20th century and quickly adapted as one of the main methods in business finance.
• Once you know your break-even point, you can see how various changes — in costs or pricing strategies — will affect profitability.
• Break-even analysis is often used by businesses to estimate the feasibility of new products before they are launched.

Break-Even Point Examples