Break Even Sales Calculator

A break even point calculator is a tool that helps you determine the minimum amount of revenue you need to cover your costs. It takes into account two types of costs: fixed costs and variable costs. Fixed costs are expenses that do not vary with the quantity of goods or services you produce. Examples of fixed costs include rent, salaries, and insurance. Variable costs are expenses that increase or decrease with the number of units produced or sold. Examples of variable costs include raw materials, packaging, and shipping.

 

What is Fixed Cost?

No matter how much is produced in terms of goods or services, fixed costs do not change. Leases, salaries, and insurance are a few examples of long-term obligations that typically come with these prices. With respect to production and sales levels, fixed expenses remain constant. Here are some instances of fixed costs:

• Rent: is the price for renting a storefront or office space.
• Salaries: The price of giving employees a set salary or payment.
• Insurance: The price you pay to protect your company against risk.

What is Variable Cost?

Costs that vary according on the volume of production or sales are known as variable costs. Direct labour, raw materials, packing, and shipping are all included in these expenses. Usually, variable costs are inversely correlated with production volume. Variable costs include, for example:

• The price of the raw resources utilised to make a product.
• Direct labour is the price of paying workers to make a product.
• Cost of the materials needed to package the product, or packaging.
• Cost of delivering the product to the customer, or shipping.

How to Use This Calculator?

To use a break even sales calculator, you'll need to input three key pieces of information:

• Fixed Costs: The total amount of money you spend on fixed costs each month.
• Variable Costs per Unit: The amount of money it costs you to produce each unit.
• Selling Price per Unit: The price at which you sell each unit.

Once you've entered this information, the calculator will tell you the minimum number of units you need to sell to cover your costs. It may also provide additional information such as the total revenue needed to break even, the contribution margin per unit, and the profit margin.

What is the Formula to Calculate Break Even Point ?

The formula to calculate the break even point is:

Break Even Point = Fixed Costs / (Selling Price per Unit - Variable Costs per Unit)

For example, let's say you run a business that sells widgets. Your fixed costs are $10,000 per month, your variable costs per unit are $5, and your selling price per unit is $10. Using the formula above, your break even point would be:

Break Even Point = $10,000 / ($10 - $5) = 2,000 units

This means you need to sell 2,000 units per month to break even. If you sell fewer units, you'll lose money. If you sell more units, you'll start making a profit.