Break Even Point Calculator
This calculator helps you determine how many units of a product you need to sell to cover all your costs (fixed and variable) without making a profit or loss.
Enter your Fixed Costs, Variable Cost per Unit, and Selling Price per Unit to calculate your break-even point.
Enter Your Business Costs
Understanding Break Even Point
What is Break Even Point?
The break-even point is the number of units you need to sell to cover all your costs (fixed and variable) without making a profit or loss. It's a crucial metric for business planning and financial analysis.
Break Even Point Formula
The formula to calculate the break-even point in units is:
BEP (Units) = Fixed Costs / (Selling Price per Unit - Variable Cost per Unit)
Or:
BEP (Units) = FC / (P - VC)
Break Even Point in Revenue
To find the break-even point in revenue (dollar amount):
BEP (Revenue) = BEP (Units) × Selling Price per Unit
Contribution Margin
The contribution margin is the amount each unit contributes to covering fixed costs:
Contribution Margin = Selling Price - Variable Cost
This shows how much each sale contributes to paying off fixed costs before generating profit.
Example Calculation
If Fixed Costs = $10,000, Variable Cost = $5/unit, Selling Price = $20/unit:
BEP (Units) = $10,000 / ($20 - $5) = $10,000 / $15 = 666.67 units
BEP (Revenue) = 667 units × $20 = $13,340
Break Even Point Examples
Click on an example to see the step-by-step calculation:
Example 1: Coffee Shop
Scenario: A coffee shop wants to know how many cups it needs to sell to break even.
1. Known Values: Fixed Costs = $8,000/month, Variable Cost = $1.50/cup, Selling Price = $5/cup.
2. Formula: BEP = FC / (P - VC)
3. Calculation: BEP = $8,000 / ($5 - $1.50) = $8,000 / $3.50
4. Result: BEP ≈ 2,286 cups/month
Conclusion: The shop needs to sell about 2,286 cups per month to break even.
Example 2: T-Shirt Business
Scenario: A t-shirt business wants to calculate its break-even point.
1. Known Values: Fixed Costs = $2,000/month, Variable Cost = $8/shirt, Selling Price = $20/shirt.
2. Formula: BEP = FC / (P - VC)
3. Calculation: BEP = $2,000 / ($20 - $8) = $2,000 / $12
4. Result: BEP ≈ 167 shirts/month
Conclusion: The business needs to sell about 167 shirts per month to break even.
Example 3: Software Subscription
Scenario: A SaaS company wants to find its break-even point.
1. Known Values: Fixed Costs = $15,000/month, Variable Cost = $2/user (server costs), Selling Price = $10/user/month.
2. Formula: BEP = FC / (P - VC)
3. Calculation: BEP = $15,000 / ($10 - $2) = $15,000 / $8
4. Result: BEP = 1,875 users
Conclusion: The company needs 1,875 paying users to break even.
Example 4: Manufacturing Business
Scenario: A manufacturer wants to calculate break-even for a new product.
1. Known Values: Fixed Costs = $50,000 (equipment), Variable Cost = $25/unit, Selling Price = $75/unit.
2. Formula: BEP = FC / (P - VC)
3. Calculation: BEP = $50,000 / ($75 - $25) = $50,000 / $50
4. Result: BEP = 1,000 units
Conclusion: The manufacturer needs to produce and sell 1,000 units to break even.
Example 5: Restaurant
Scenario: A restaurant wants to determine its daily break-even point.
1. Known Values: Fixed Costs = $3,000/day, Variable Cost = $8/meal, Selling Price = $25/meal.
2. Formula: BEP = FC / (P - VC)
3. Calculation: BEP = $3,000 / ($25 - $8) = $3,000 / $17
4. Result: BEP ≈ 177 meals/day
Conclusion: The restaurant needs to serve about 177 meals daily to break even.
Example 6: E-commerce Store
Scenario: An online store selling handmade jewelry.
1. Known Values: Fixed Costs = $5,000/month, Variable Cost = $15/item, Selling Price = $50/item.
2. Formula: BEP = FC / (P - VC)
3. Calculation: BEP = $5,000 / ($50 - $15) = $5,000 / $35
4. Result: BEP ≈ 143 items/month
Conclusion: The store needs to sell about 143 items per month to break even.
Example 7: Consulting Business
Scenario: A consultant wants to know how many clients they need.
1. Known Values: Fixed Costs = $6,000/month, Variable Cost = $100/client (materials), Selling Price = $1,000/client.
2. Formula: BEP = FC / (P - VC)
3. Calculation: BEP = $6,000 / ($1,000 - $100) = $6,000 / $900
4. Result: BEP ≈ 6.67 clients/month
Conclusion: The consultant needs about 7 clients per month to break even.
Example 8: Book Publishing
Scenario: An author self-publishing a book.
1. Known Values: Fixed Costs = $10,000 (editing, design), Variable Cost = $3/book, Selling Price = $20/book.
2. Formula: BEP = FC / (P - VC)
3. Calculation: BEP = $10,000 / ($20 - $3) = $10,000 / $17
4. Result: BEP ≈ 589 books
Conclusion: The author needs to sell about 589 books to break even.
Example 9: Gym Membership
Scenario: A gym calculating break-even membership.
1. Known Values: Fixed Costs = $20,000/month, Variable Cost = $10/member, Selling Price = $50/month.
2. Formula: BEP = FC / (P - VC)
3. Calculation: BEP = $20,000 / ($50 - $10) = $20,000 / $40
4. Result: BEP = 500 members
Conclusion: The gym needs 500 paying members to break even.
Example 10: Mobile App
Scenario: A freemium app with premium subscriptions.
1. Known Values: Fixed Costs = $30,000/month, Variable Cost = $0.50/user (server costs), Selling Price = $5/month.
2. Formula: BEP = FC / (P - VC)
3. Calculation: BEP = $30,000 / ($5 - $0.50) = $30,000 / $4.50
4. Result: BEP ≈ 6,667 premium subscribers
Conclusion: The app needs about 6,667 paying subscribers to break even.
Frequently Asked Questions
1. What is the break-even point?
The break-even point is the number of units you need to sell to cover all your costs (fixed and variable) without making a profit or loss.
2. How is the break-even point calculated?
BEP (Units) = Fixed Costs / (Selling Price per Unit - Variable Cost per Unit). For revenue: BEP (Revenue) = BEP (Units) × Selling Price.
3. What are fixed costs?
Fixed costs are expenses that don't change with production volume (e.g., rent, salaries, insurance).
4. What are variable costs?
Variable costs change with each unit produced (e.g., materials, labor, packaging).
5. What if my selling price equals variable cost?
If Selling Price = Variable Cost, you can never break even because the denominator becomes zero (infinite units needed). You must price above variable cost.
6. How can I lower my break-even point?
You can: 1) Reduce fixed costs, 2) Reduce variable costs, or 3) Increase selling price.
7. Does break-even analysis consider taxes?
No, basic break-even analysis doesn't consider taxes. It calculates pre-tax break-even.
8. What's the contribution margin?
Contribution Margin = Selling Price - Variable Cost. It's how much each sale contributes to covering fixed costs.
9. Can I use this for multiple products?
This calculator is for a single product. For multiple products, calculate a weighted average price and variable cost.
10. How often should I calculate my break-even point?
Recalculate whenever your costs or prices change significantly, or at least quarterly for accurate financial planning.
