BREAK EVEN DEFINITION:
To find out how many items you’ll have to sell to bring in enough money to break even with the expenses to make the item, fill in the three fields of the Break Even Calculator. Try this free calculator today!
Fixed Costs:
The total of all business expenses not directly related to the production of the item.
Variable Cost Per Unit:
The cost it takes to produce one item, including raw materials and the cost of labor to create an item.
Selling Price Per Item:
The price at which you expect to sell the items.
Do not put in any currency symbols — enter just the amounts. Press the Calculate button, and you’ll get back a message “You will break even at: x units,” where x will be the number calculated from your entries. This calculator is perfect for your break-even financial matters!
What is a break even point?
Break-even analysis is a common tool that is used to figure out the economic feasibility of production of an item, no matter what the item may be. Given basic data about the cost to produce an item and the price at which the item is expected to sell, the break-even point is the number of items that must be sold to bring in enough revenue to cover the costs.
Profit is not being calculated at this point — actually, when the break-even point is achieved, the profit is zero. Any revenue generated beyond the break-even point is considered profit. Another way to explain the break-even point is to say that the company has taken in enough money to pay expenses. Use this financial calculator to find your break even point!
Fixed Costs
These costs are a major part of break-even calculations and are defined as those business expenses that don’t vary with how many items are produced. This includes such categories of expenses as management and staff salaries, business insurance, office rent, etc. Another name for fixed costs is company overhead.
Variable Costs
These costs are those business expenses that are directly related to the production of the item. These costs are concerned with such items as the price of raw materials and the direct cost of labor used to produce the items.
The Break Even Equation
1. The total cost of an item line is equal to the sum of fixed costs and variable costs.
2. The total revenue for an item equals the quantity sold times the price per item.
3. The break-even point occurs when total cost equals total revenue.
Laying out these three statements as an equation, a break-even point occurs when (Price Per Item) x (Quantity of Items Sold) = (Fixed Costs) + (Variable Costs).
Given the price of one item, and the numbers for the two types of costs, that equation can then be rearranged to give you the quantity of items that must be sold to be to reach the break-even point.
Try Different Entries
When you’re done, you can go back if you like and change the planned price per item to see a different result for the break even point. Or you can see what the result will be if you adjust your costs. Whichever way you re-adjust your calculations, you’ll find a Break Even Calculator to be a valuable tool for business operations. So what are you waiting for? Try this online calculator today!
